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Page 1: Midstream and NGL Basics-Merritt · remove natural gas condensates, water and other contaminants to prevent the ... end‐users. • Raw NGL pipelines transport NGLs from processing

5/9/2016

1

MidStream ‐ Basics

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Step 1: Gas Gathering

3

• Gas gathering systems simply transports gas from the well-head to the processing facilities.

• Gathering lines typically operate at relatively low pressures (just below wellhead pressure) and utilize pipe diameters of less of than 12”. Lower pressure systems reduce the need to install field compression and generally allow for greater production.

• At this stage, the gas is usually treated to remove natural gas condensates, water and other contaminants to prevent the components from obstructing flow in or destroying the integrity of the gathering system. Small-scale gas-oil separators, condensate separators, and dehydration units are typical treating equipment.

Gathering System

Processing Plant

Source: Williams Companies and Tudor, Pickering, Holt

Step 2: Plant Processing

4

• Plant processing takes “wet” gas from the field and removes the heavier, more liquid components (NGLs) and other contaminants (water, hydrogen sulfide, etc).

• For safety and integrity reasons, pipelines impose restrictions on the composition of gas allowed to enter the line. Gas composition is measured in terms of dew point (the temperature at which vaporized liquid will condense at pipeline pressure) and the heat, or BTU content of the gas. A higher BTU content means more liquids in the stream.

• Processing economics depend, in part, on the price of the liquids removed vs. their equivalent BTU content if left in the original gas. The difference between the price of the liquids removed vs. their value in gaseous form is called a “frac spread.”

Marketable Gas to Interstate Pipelines

Processing PlantRaw NGL Pipeline

Wet Gas (Wellhead

gas)

(Typical NGL Mix)

Ethane (40-45%)

Propane (25-30%)

Normal Butane (5-10%)

Natural Gasoline (10-15%)

Isobutane (10%)

Source: Williams Companies and Tudor, Pickering, Holt

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Step 3: Fractionation

• Fractionation is the process of turning

the raw NGL stream into marketable

products.

• One‐by‐one, the hydrocarbons are boiled

off, moving lightest (ethane) to heaviest

(natural gasolines).

• Fractionators are much larger scale than

gas processing plants, handling the output

from multiple processing plants. They are

usually located close to the petrochemical

end‐ users.

• Raw NGL pipelines transport NGLs from

processing plants to fractionators.

Finished NGLs pipelines transport the

product to market.

5

Fractionator

NGLPipeline

Products Pipelines

Storage

Raw NGL “Barrel”

Fractionation

Ethane

Propane

Normal Butane

Natural Gasoline

Isobutane

40-45%

25-30%

10%

5-10%

10-15%

Source: Tudor, Pickering, Holt

Step 4: Marketing

6

Storage

Industrial & Other End-Users

Fractionator

Refinery

Chemical Plant

Source: Williams Companies and Tudor, Pickering, Holt

• NGL marketers match up sellers (E&P and Midstream companies) with buyers –petrochemicals, industrials, farmers, propane companies, etc.

• Services include NGL transportation, storage and risk management services.

• NGL marketing is primarily a physical business, with limited liquidity on financial hedging of individual NGL components much beyond 6-12 months.

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Why is Gas Processed?

NGL Removal is Non‐Discretionary

The typical NGL “barrel” looks like this: • Propanes and heavier components(propanes+), make up ~60% of the NGL stream, andhave to come out of the wet gas produced from thewellhead. Pipeline specs mandate it.

• Ethane is “discretionary,” meaning producers/processors can opt to keep it in the stream or remove it, depending on economics.

• Keeping ethane in the steam is called “ethane rejection” (we know, it is the opposite of what is intuitive, but think of it from the processors’ standpoint). The amount of Btus is always the same - it’s just the state of matter that’s different.

Ethane rejection = more gas, fewer NGLs

Normal processing = less gas, more NGLs

5-10% Normal Butane

10% Isobutane

10-15% Natural Gasoline

40-45% Ethane

25-30% Propane

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Raw natural gas typically consists primarily of methane, the shortest and lightest hydrocarbon molecule. It also contains varying amounts of:Heavier gaseous hydrocarbons: ethane (C2H6), propane (C3H8), normal butane](n‐C4H10), isobutane (i‐C4H10), pentanes and even higher molecular weight hydrocarbons. When processed and purified into finished by‐products, all of these are collectively referred to as Natural Gas Liquids (NGL)).Acid gases: carbon dioxide (CO2), hydrogen sulfide (H2S) and mercaptans such as methanethiol (CH3SH) and ethanethiol(C2H5SH).Other gases: nitrogen (N2) and helium (He).Water: water vapor and liquid water.Liquid hydrocarbons: perhaps some natural gas condensate (also referred to as casinghead gasoline or natural gasoline) and/or crude oil.Mercury: very small amounts of mercury primarily in elemental form, but chlorides and other species are possibly present

Composition of Raw Natural Gas

Raw natural gas must be purified to meet the quality standards specified by the major pipeline transmission and distribution companies. Those quality standards vary from pipeline to pipeline and are usually a function of a pipeline system’s design and the markets that it serves. In general, the standards specify that the natural gas:

Be within a specific range of heating value (caloric value). For example, in the United States, it should be about 1,035 ± 5% Btu per standard cubic foot of gas at an absolute pressure of 1 atmosphere and 60 °F (41 ± 5% MJ per normal cubic meter of gas at 1 atmosphere of absolute pressure and 0 °C).

Be delivered at or above a specified hydrocarbon dew point temperature (below which some of the hydrocarbons in the gas might condense at pipeline pressure forming liquid slugs which could damage the pipeline).

Be free of particulate solids and liquid water to prevent erosion, corrosion or other damage to the pipeline. Be dehydrated of water vapor sufficiently to prevent the formation of methane hydrates within the gas processing plant or 

subsequently within the sales gas transmission pipeline.[2] [3]

Contain no more than trace amounts of components such as hydrogen sulfide, carbon dioxide, mercaptans, nitrogen, and water vapor.

Maintain mercury at less than detectable limits (approximately 0.001 ppb by volume) primarily to avoid damaging equipment in the gas processing plant or the pipeline transmission system from mercury amalgamation and embrittlement of aluminum and other metals

Required Quality of End-Product Processed Gas

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El Paso Natural Gas Company, L.L.C. FERC Gas TariffThird Revised Volume No. IA

3. QUALITY

Part IV: GT&CSection 3 - Quality

Version 3.0.0

J4lIssued on: August 17, 2012 Effective on: September 18, 2012

3.1 General Specifications. Unless otherwise provided in Sections 3.2 and/or 3.4 of theGT&C, Shipper warrants that all Natural Gas received by Transporter at any mainlineReceipt Point(s) shall conform to the following specifications and must be, in Transporter'sreasonable judgment, otherwise merchantable:

(a) Liquids - The gas shall be free of water and hydrocarbons in liquid form at thetemperature and pressure at which the gas is received. The gas shall in no eventcontain water vapor in excess of seven (7) pounds per million standard cubic feet.

(b) Hydrocarbon Dew Point - The hydrocarbon dew point of the gas received shall notexceed twenty degrees Fahrenheit (20°F) at normal pipeline operating pressures.

(c) Total Sulfur - The gas shall not contain more than five (5) grains of total sulfur,which includes hydrogen sulfide, carbonyl sulfide, carbon disulfide, mercaptans,and mono-, di- and poly-sulfides, per one hundred (I 00) standard cubic feet. Thegas shall also meet the following individual specifications for hydrogen sulfide,mercaptan sulfur or organic sulfur:

(i) Hydrogen Sulfide - The gas shall not contain more than one-quarter (0.25)grain of hydrogen sulfide per one hundred (100) standard cubic feet.

(ii) Mercaptan Sulfur - The mercaptan sulfur content shall not exceed morethan three-quarters (0.75) grain per one hundred (100) standard cubic feet.

(iii) Organic Sulfur - The organic sulfur content shall not exceed one and onequarter (1.25) grains per one hundred (100) standard cubic feet, whichincludes mercaptans, mono-, di- and poly-sulfides, but it does not includehydrogen sulfide, carbonyl sulfide or carbon disulfide.

(d) Oxygen - The oxygen content shall not exceed two-tenths of one percent (0.2%) byvolume and every reasonable effort shall be made to keep the gas delivered free ofoxygen.

(e) Carbon Dioxide - The gas shall not have a carbon dioxide content in excess of two percent (2%) by volume, except for gas acceptable under Sections 3.2 and 3.4 ofthe GT&C.

(f) Diluents - The gas shall not at any time contain in excess of three percent (3%)total diluents (the total combined carbon dioxide, nitrogen, helium, oxygen, andany other diluent compound) by volume, except for gas acceptable under Sections3.2 and 3.4 of the GT&C.

Issued on: August 17, 20 12 Effective on: September 18, 2012l42

El Paso Natural Gas Company, L.L.C.FERC Gas TariffThird Revised Volume No. IA

Part IV: GT&CSection 3 - Quality

Version 3.0.0

3.1 General Specifications (continued)

(g) Dust, Gums and Solid Matter - The gas shall be commercially free of dust, gumsand other solid matter.

(h) Heating Value - The gas shall have a Heating Value of not less than 967 Btu per cubic foot.

(i) Temperature - The gas received by Transporter shall be at temperatures not in excess of one hundred twenty degrees Fahrenheit (120°F) nor less than fiftydegrees Fahrenheit (50°F). Any party tendering gas at a temperature standard lessthan fifty degrees Fahrenheit (50°F) shall receive a waiver of such standard only ifa test has been conducted in accordance with procedures set forth in Section 3.1O(b)hereof and the results from such test demonstrate that the particular segment of thepipeline tested can be safely operated below the fifty degrees Fahrenheit (50°F)temperature standard.

(j ) Deleterious Substances - The gas shall not contain deleterious substances inconcentrations that are hazardous to health, injurious to pipeline facilities oradversely affect merchantability.

2. Grandfathered Receipts. Transporter agrees that at certain grandfathered plant ReceiptPoints and Interconnects on Transporter's system described below, where gas does not conform to the carbon dioxide and/or the total diluent specification set forth in Sections3.l(e) and (f) of the GT&C, gas shall be received according to the provisions of this Section 3.2 which are based on the highest non-conforming monthly average percentagesof carbon dioxide and total diluents for a Month during the twelve (12) Month base period ended July 31, 1990. Under this Section 3.2:

(a) Transporter shall accept gas with carbon dioxide and/or total diluents at percentagesup to the non-conforming specifications at volumes up to the residue volume at the plant design capacity or historical Interconnect volumes, as such existed on July 31,1990, provided, however, that to the extent Transporter must curtail non conformingvolumes to meet Transporter's Delivery Point specifications for carbon dioxideand/or total diluents, Transporter shall curtail volumes at these plants down to 125%of historical volumes .

(b) Historical volumes for non-conforming plants shall be deemed to be the dailyaverage for the highest monthly tailgate volume delivered to Transporter during thetwelve ( 12) Month base period ended July 31, 1990 and in the event a nonconforming plant or plants are closed, Transporter shall transfer the applicablehistorical volumes to another plant owned by the same party.

(c) The identification of the non-conforming plants, the grandfathered speciftcationsand the historical volumes are set forth on the table below.

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Difference between “NGL & LPG”

Illustration: “Natural Gas Liquids - Supply Outlook 2008-2015”, International Energy Administration

Definitions - NGL Types “Purity Products”

“Purity” means that most (at least 90%) of theliquid stream contains one type of moleculeEthane

Propane

Iso-butane

Normal butane

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Definition of Terms Ethane

Simplest molecule containing more than 1 carbon atom(C2H6)

Foundation of manycompounds in thepetrochemical industry

Abbreviated as “C2” Vaporizes at -126°F (-88°C)

Definition of Terms Propane

Abbreviation – C3

Chemical compositionC3H8

Boiling point -44°F (-42°C)

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Definition of Terms Normal Butane

Abbreviation – NC4

Chemical compositionC4H10

Boiling point 32°F 0°C)

Definition of Terms Iso-Butane

Abbreviation – IC4

Boiling point 11°F (-12°C)

Chemical composition

C4H10

Is an “isomer” of normal

butane – a different

arrangement of the

molecules makes it

behave differently than

NC4

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Definition of TermsNatural Gasoline

Abbreviation – C5+ (the “+” means it’s a mix of pentanes plus heavier molecules such as C6-C9 in smaller amounts)

Usually few molecules heavier than C10

Markets Gasoline blending

Ethylene production

Solvent production (specialty application)

Ethanol (denaturant)

Diluent for use in syncrude operations

Summary – Physical Properties

Boiling Pt  °F MW

Methane ‐259 16.04

Ethane ‐128 30.07

Propane ‐44 44.10

Iso‐Butane 11 58.12

N‐Butane 32 58.12

Nat Gasoline 82‐97 100‐110

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Plant technology determines the limit of the NGL’s that can actually be recovered from the gas:

“Lean oil” plant NGL recoveries Least efficient for ethane, propane

99% butanes and C5+, 65-75% propane, only 15-30%ethane

Refrigeration plants (use propane to “chill” the gas to remove more NGL)

More efficient

100% propane, butanes, and C5+, up to 80-85% ethane

Cryogenic (turbo expander) technology Most efficient and most expensive to build

100% propane, butanes and C5+, up to 85-90% ethane

26

NGL’s from Gas – Yield Estimates Impact of Gas Plant Technology

Lean Oil Absorption Process

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JT Plant

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AMINE TREATING

10 psig  210 F

280 F

250 F

70 psig 125 F

965 psig

965 psig

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GLYCOL TREATING

370 F120 F      70 psig

320 F

180 F

1 psig

960 psig

‐120 F

80 F

Demethanizer

220 psig

5 F

Mol Seives

NGL Surge Tank

Cold Separator Expander /compressor

950 psig

‐90 F

‐150 F

‐20 F

CRYO

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955 psig 115 F

950 psig

5 F

‐90 F

‐150 F

220 psig

80 F

‐120 F850 ‐900 psigEPNG MAOP 944 psig

Typical Demethanizer Tower

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NGL Market Characteristics

Natural Gas Liquids – oil field leftovers

32

Natural gas liquids (NGLs) are light hydrocarbons that are dissolved in associated or non‐associated natural gas in a hydrocarbon reservoir, and are produced with the gas stream.”

‐ International Energy Agency, Supply Outlook 2008‐2015

Intro to Natural Gas Liquids (NGLs)

In other words, no one drills for NGLs. They show up in the gas stream as a byproduct of drilling for either crude or natural gas.

Also, petroleum refineries produce a certain amount of propane, butane, and natural gasoline as byproducts of their processes.

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What are NGLs used for?

Component Use

Ethane (C2) • Chemical Feedstock

Propane (C3) • Chemical Feedstock• Residential & Commercial Heating• Industrial & Vehicle Fuel• Agriculture (crop drying)• LPG Exports

Normal Butane (nC4) • Motor Gasoline Blendstock• Chemical Feedstock• Feedstock for Isomerization (Make Iso‐Butane)• LPG Exports

Iso‐Butane (iC4) • Feedstock to Make Alkylate for Motor Gasoline Blending

Natural Gasoline (C5+) • Motor Gasoline Blendstock• Chemical Feedstock• Ethanol Denaturant• Canadian Oil Sand & Heavy Crude Diluent

33

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Uses of Ethane & Ethylene

• Ethylene is the simplest alkene and the most widely produced organic compound in the world. 97% of ethane is used for ethylene production.

• About 50% of ethylene is polymerized into polyethylene. This polymer is used most commonly to form lightweight packaging products (i.e. shopping bags) from low-density polyethylene (LDPE) and as a medium for injection molding (to make products like plastic containers) from high-density polyethylene (HDPE).

Surfactants: Ethylene glycol

(antifreeze)Paints

Fabric Softener

Adhesives

Inks

Insecticides

Laxatives

Detergents

Construction

Ethyline oxide

PVC

Polyvinyl chlorideEthylene dichloride

VCM

Vinyl chloride monomer

Ethane Ethylene

Other Polyethylene Upholstery

Flooring

Clothing

Signs

Electronics

High density (HDPE):

Containers

Automotive fittings

Plumbing

Welding gas

Fruit ripener

Anesthetic

Low density (LDPE):

Packaging

Films

30%

97%

50%

Other Uses

50%

Source: Tudor, Pickering, Holt & Co.

35

Petrochemicals

Uses of Propane & Propylene

• Propylene is the second simplest alkene and is most commonly produced as a byproduct in ethylene production.About 62% of propylene is polymerized into polypropylene. This polymer is most commonly used as a medium for injection molding (for plastic products like containers) and in the fibers market (i.e. carpeting, textiles).

• Propane demand has two seasonal offsets. Residential/commercial demand (40% of total) peaks during the winterheating season and troughs in the summer. Petrochemical demand (49%) peaks during the summer when propaneprices are lower, as the petrochemical industry switches between feedstocks depending upon price.

Medicines

Cosmetics

Nailpolish removerCumene

Butanols

(solvents)

Construction

Residential/Commercial

Heating

Cooking

Transportation

Propylene Oxide

Furniture/Bedding

Propane Propylene Polypropylene

Acrylonitrile

Farming

Packaging

Textiles

Stationary

Plastics

Auto components

Banknotes

Paints

Adhesives

Detergents

PVC

Rubbing alcohol

Conveyor belts

Crop drying

Weed control

Fuel

Acrylic fibers Synthetic rubber

62%

Source: EIA/DOE and Tudor, Pickering, Holt & Co.

36

49%

Other Uses 8%

6% 6%

27%

24%

21%

40%8%

5%

Petrochemicals

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NGL’s from Gas - Processing Economics

Gas Plant Profitability Metric – “Frac Spreads”

The gas plant equivalent of a refinery“crack spread”

Measure of gross profitability for gas plants Calculated as the difference between the revenue from sales of NGL’s contained in a gas

stream as liquid and their value if left in the gas pipeline and sold at gas prices

Frac Spread – Sum of the Parts is Worth More Than the Whole

38

$11.84 – Gas Price = Frac Spread• Step 3: Subtract natural gas price from composite NGL price:

• Step 4: Adjust spread for transportation, operating costs, and plant processing fuel.

$11.84• Step 2: Divide F by E to get composite NGL price ($/mmbtu):

• Step 1: Calculate the NGL value ($/MMBtu). Multiply component prices by the heat content and composition of the gas. • Frac spread is the difference

between the value of theprocessed NGLs and the value of the equivalent btus of gas inputinto the processing plant.

• Frac spreads are negatively correlated with gas prices (gas goes up, fracs go down) andpositively correlated with NGLprices (NGLs go up, fracs go up).

• Frac spreads are volatile andusually seasonal – narrowing withhigher gas prices during thewinter.

Source: Targa Resources and Tudor, Pickering, Holt

A B C

=[A*B]

D =[D*A]

Assumed Mix

Conversion Factor

(MMBtu/Gal)

Weighted Average

NGL Price ($/gal)

Composite

($/gal)

Ethane 45% 0.0664 0.0299 $0.490 $0.221

Propane 30% 0.0916 0.0275 $1.248 $0.374

Iso butane 5% 0.0997 0.0100 $1.480 $0.074

Normal butane

10% 0.1037 0.0052 $1.475 $0.148

Natural Gasoline

10% 0.1178 0.0118 $1.815 $0.182

Total NGL E 0.0843 F $0.998

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NGL/LPG Revenues - Logistics Costs Matter

Gas liquids are expensive to handle, store, and transport compared to refined products Require high pressure and/or low temperature to maintain

liquid state for shipment and handling

Highly flammable – vapor “crawls” instead of rising; is heavier than air

Needs special trucks, ships and storage (thick steel, insulated tanks, or underground caverns for large volumes)

NGL Logistics – Realized Pricing Estimates “Netback” Market Concept & the “T &F” Fee

NGL values basis different locations consist of the commodity component and a location component

The commodity component is the value for the product itself, but:

NGL prices are only published at a few locations where large volumes are traded (hubs)

These traded prices must be adjusted by a location differential to get the value at the plant tailgate

Realized pricing at the plant = Hub value - Transportation cost –Fractionation Cost

Known as a “T&F” adjustment

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Getting NGLs to Market

Source: Canadian NEB, edited for changing ownership & new pipelines proposed

• There are 2 major U.S NGL trading hubs and 2 Canadian hubs: Mont Belvieu, TX; Conway, KS; Edmonton/Fort Saskatchewan, Alberta; and Sarnia, Ontario.

• NGL pipelines transport NGLs from producing fields to these hubs, where they are stored, fractionated, and/or distributed for end use.

• Mont Belvieu, the largest of these hubs, is located on the Texas Gulf Coast where there is the highest concentration of petrochemical, storage, pipeline, fractionation, and refinery infrastructure.

• Given its strategic location, Mont Belvieu is considered the price setter for North American NGL markets.

NGL Logistics Costs“T&F” Cost Snapshot – Field to Hubs

Rockies

Bakken

San Juan Basin

W TX SE NM

South TX

Marcellus

Mid-Continent

Mont Belvieu

18-20 cpg

20-22 cpg

28-30 cpg

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37

Ethane Prices How Low Can They Go?

Ethane – the alternate market is natural gas Price Forecast – start with the base price of gas at the plant tailgate, plus cost to

recover it as NGL, plus transportation and fractionation cost (T&F), plus a margin

Example – assume gas price of $2.00/MMBTU Gas value is 13.18 CPG (BTU equivalent in CPG)

Transportation and fractionation of 13.8 CPG

Plant NGL extraction cost of 2.00 CPG (incremental expense)

Would need a minimum of 34 CPG at the hub to justify recovery for this plant (13.18 + 13.8 + 2.00 + 5.00) to earna 5 CPG margin as a return

Gas Processing: Three Major Contract Structures

Keepwhole (KH)

Structure: Processor compensates(“keeps whole”) the producerfor the amount of gas removedfrom the processing stream.Processor gets paid in NGLs,but compensates producerbased on gas prices.

Commodity Exposure: Long NGLs, short gas. So twosources of exposure – relativegas/NGL prices and absoluteNGL prices.

Volatility: High. Frac spreadscan and do move wildly andseasonally. Becausemidstream assets are held more by MLPs who do not like that exposure, the trend has been to negotiate away from keep whole contracts and toinsert, conditioning language, which provides minimum fees if fracs go negative.

Percent of Proceeds (POP)

Structure: Processor is paid byretaining a percent of theoutlet stream, either NGLs, gas or a combination.

Commodity Exposure: Long liquids and/or natural gas,depending on contractstructure.

Volatility: Moderate. Higher commodity prices = higher POP proceeds.

Fee-Based

Structure: Fixed fee, either volumetric or a demand payment.

Commodity Exposure: None.

Volatility: If volumetric payment, only volatility isthroughput based.

Keepwhole Margin =

NGLs Removed (MMBtu) x Frac Spread ($/MMBtu)

Percent of Proceeds Margin =

[NGLs Removed (MMBtu) xNGL Price ($/MMBtu) x % ofNGLs Retained] +[Gas Remaining (MMBtu) xGas Price ($/MMBtu) x % of Gas Retained]

Fee Margin =

Inlet Gas (MMBtu) x ProcessingFee ($/MMBtu)

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NGL’s from Gas - Processing Economics NGL Revenue Calculation – Plant Income

NGLComponent

Volume Actual Yield

Transport Fee Fractionation Fee

ComponentGross NGLRevenue

At Market Location

Plant’s “Netback”

NGL Revenue

NGL’s from Gas - Processing Economics NGL Revenue Calculation & Producer Income

Plant NGL Netback Revenue

Producer NGL Revenue

SharePlant

Processing Fee(s)

ProducerNGL Revenue

Share

Producer Gas Sales Producer

Total Gas Stream

Revenue

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200 MMCFD Plant January 2014

Plant Inlet NGLs

MCF MMBTU Gals BTU/Gal MMBtu Value $/MMBtu $/Gal T&F Net $/Gal Net Value

6,681,632      8,215,879             Methane 18,765            59,729            1,121              6,189                 5.521958 3,481$                

Ethane 12,312,296   66,340            816,798         4,060,854        4.971676 0.330      0.144338 0.185          2,283,717$        

GD ElPaso 4.49 Propane 9,104,843      91,563            833,667         12,728,625      15.268242 1.398      0.144338 1.254          11,414,447$     

Iso Butane 1,395,333      99,630            139,017         2,120,822        15.255847 1.520      0.144338 1.376          1,919,422$        

Inlet Gas Value = 36,889,297$         N Butane 3,091,074      103,740         320,668         4,619,409        14.405581 1.494      0.144338 1.350          4,173,248$        

Iso Pentane 805,115         109,680         88,305            1,680,342        19.028838 2.087      0.144338 1.943          1,564,133$        

N Pentane 845,146         110,870         93,701            1,763,890        18.824596 2.087      0.144338 1.943          1,641,903$        

Residue N Hexanes + 1,213,966      115,950         140,759         2,533,648        17.999853 2.087      0.144338 1.943          2,358,426$        

MCF MMBTU 28,786,538   2,434,036      29,513,779$    12.125449 25,358,776$      10.418406

5,454,150      5,643,786            

Frac Spread = 7.635449$       $/MMBTU

Residue Gas Value= 25,340,599$        

Adj Frac Spread = 5.928406$       $/MMBTU

Gross Margin= 18,584,957$        

Gross Margin Adj T&F= 14,429,954$        

200 MMCFD Plant August 2015

Plant Inlet NGLs

MCF MMBTU Gals BTU/Gal MMBtu Value $/MMBtu $/Gal T&F Net $/Gal Net Value

6,681,632      8,215,879             Methane 18,765            59,729            1,121              3,652                 3.258267 943$                    

Ethane 12,312,296   66,340            816,798         2,396,133        2.933569 0.195      0.144338 0.050          618,996$           

GD ElPaso 2.671 Propane 9,104,843      91,563            833,667         3,406,186        4.085788 0.374      0.144338 0.230          2,092,007$        

Iso Butane 1,395,333      99,630            139,017         714,734            5.141343 0.512      0.144338 0.368          513,334$           

Inlet Gas Value = 21,944,613$         N Butane 3,091,074      103,740         320,668         1,585,832        4.945402 0.513      0.144338 0.369          1,139,672$        

Iso Pentane 805,115         109,680         88,305            739,125            8.370131 0.918      0.144338 0.774          622,916$           

N Pentane 845,146         110,870         93,701            775,874            8.280292 0.918      0.144338 0.774          653,887$           

Residue N Hexanes + 1,213,966      115,950         140,759         1,114,464        7.917516 0.918      0.144338 0.774          939,243$           

MCF MMBTU 28,786,538   2,434,036      10,736,000$    4.410781 6,580,997$         2.703739

5,454,150      5,643,786            

Frac Spread = 1.739781$       $/MMBTU

Residue Gas Value= 15,074,552$        

Adj Frac Spread = 0.032739$       $/MMBTU

Gross Margin= 4,234,690$          

Gross Margin Adj T&F= 79,687$                

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Questions?