Vaquero Midstream Permian DUG 2016 Capturing Economic Value of Mexico s Natural Gas Demand Through Midstream Reliability

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2 Vaquero Midstream Permian DUG 2016 Capturing Economic Value of Mexico s Natural Gas Demand Through Midstream Reliability Midstream Spotlight May 23, 2016

3 If This PresentaLon Had a Facebook Page Economic Up8ck Mexico Demand Poli8cal and Regulatory Unknown Infrastructure Challenge Reliability: Realigning Around Value Vaquero: A Basin Midstream Solu8on 3

4 Mexico Demonstrates Natural Gas Demand Waha 2-7 BCFD Agua Dulce MAKE CLEARER 4

5 Mexico s Demand From the Waha Hub: A Deliberate Choice 3+ BCFD Capacity *Already flowing 100 MMSCFD+ today Midwest 1 BCFD Comanche Trail Pipeline California 1.2 BCFD Metroplex 0.5 BCFD Roadrunner Pipeline * Trans Pecos Pipeline WAHA San Elizario 1.7 BCFD Presidio 1.4 BCFD Gulf Coast 1.5 BCFD Katy - LNG >0.5 BCFD? ExisLng Demand New Demand 5

6 Previous Economic Status But.. 6

7 The Unknowns: Regulatory and PoliLcal Railroad Commission, EPA and other regulatory influences PoliLcal ElecLon to govern our country? 7

8 Good News In Southern Delaware Basin Wide average EURs improved by 30% Delaware Wolfcamp to Reeves Core - $30- $40/BBL Service Costs fell 30-35% from 2014 to 2015 but may not be sustainable at the low rates currently be provided to E&P Not yet taken into account longer laterals (7,500 to 10,000 ) Source: Wood Mackenzie 8

9 Average ProducLon Comparison: Southern Delaware Basin Year Permits Gas MMCFD Oil MBbl/d , , ,868 1, ,772 1, SOURCE: Drilling Info MMCFD Rich Gas Produc8on 1,800 1,600 1,400 1,200 1, SOURCE: Drilling Info 9

10 CreaLng a Challenge for Midstream Infrastructure Technology Advances & Applied Science DUCs Price Points UP TOTAL PRODUCTION VOLUMES 10

11 More Crude Trucks on the Road Again!!! 11

12 Southern Delaware Basin Gas Infrastructure Today 12

13 Infrastructure Challenges: Midstream Hurdles to Overcome More Volume means no more quick fixes o Spotlights the need for increased reliability Define Reliability ü Asset Quality Size, design and mechanics AccounLng for Pressures, Liquid handling, TreaLng ü OperaLonal Capability Every Midstream being equal what s the difference? o Capacity for Significant Growth Scalability Capital Efficiency of Growth - Unit cost lower Has been the area infrastructure problem Don t let history repeat itself o Market Access Aggregate to Waha flat to capture best price Maximize the Direct and Local aspect of SDB 13

14 Alignment Challenge: Realigning Around Value Back to the Basics of Partnerships (Synergy) o CreaLng value (monetary) together Maximum value of the gas product is driven from drill bit through midstream to market o Processing Efficiency (Maximizing the BTU value) CreaLng reliable, predictable supply to meet demand o Run Time 14

15 Vaquero Culture Vaquero Midstream has assembled a team of strong industry professionals who have dedicated their careers to bringing products to market safely, efficiently and cost effeclvely. The members of the Vaquero team have served in both internal producer roles and external service provider roles, making us uniquely specialized to best serve our producer partners. Developing Willing Partnerships 15

16 Realigning Around Value Back to the Basics of Partnerships: Synergy o CreaLng monetary value together Maximum value of the gas product is driven from drill bit through midstream to market o Processing Efficiency Maximizing the BTU value CreaLng reliable, predictable supply to meet demand o Run Time The real WIN- WIN! 16

17 Vaquero s Answer: Phase I Complete A high- quality, new- build system to provide higher plant recoveries, minimal downlme and lower fuel usage 75 Miles of 30, 24 and 16 high pressure trunk line with 800 MMSCFD capacity Tailored UOP Russell 200 MMSCFD plant 5,000 BPD condensate stabilizalon at the plant inlet Residue gas pipeline to the Waha market will connect producers TO AT LEAST 12 RESIDUE PIPELINES AND MARKETS NGL pipelines conneclng to the Mont Belvieu market Expandable up to 4 total cryogenic trains (800 MMSCFD processing capacity) Ini$al System In- Service 17

18 Midstream Challenge Accepted: Vaquero Rich Gas Gathering System 18

19 Midstream Challenge Accepted: Vaquero Caymus Cryo Plant I 800 MMSCFD Large Capacity Gathering Pipeline *solving volume & hydraulic issues Reliable Service Mul8ple Residue Gas Outlets at Waha Market Hub: Atmos OneOk WTX Enterprise NTX NNG Two (2) or more NGL Outlets: Lone Star NGL Pipeline Chaparral NGL Pipeline Mexico 19

20 Vaquero Caymus Facility Phase I 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 20

21 Vaquero Caymus Facility Phase I: Inlet Liquids Handling 5k BPD 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 21

22 Vaquero Caymus Facility Phase I: Inlet Compression 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 22

23 Vaquero Caymus Facility Phase I: Bulk TreaLng & DehydraLon 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 23

24 Vaquero Caymus Facility Phase I: 200 MMSCFD Cryo Unit 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 24

25 Vaquero Caymus Facility Phase I: Dual Drive Residue Compression 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 25

26 Vaquero Caymus Facility Phase I: On Site SubstaLon 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 26

27 Vaquero Caymus Facility Phase I: Product Delivery 200 MMSCFD Cryogenic Unit w/ Propane Refrigera8on Dual Drive Residue Compression Stabiliza8on Electrical Substa8on Pistolero NGL Check Meter Slug Catcher Storage Inlet Compression Bulk Trea8ng & Dehydra8on Loading 30 Lariat Inlet Gas Pipeline Residue Gas Check Meter 27

28 Vaquero Caymus Facility Site - Scalable to 800 MMSCFD 28

29 What Does RunLme Mean to the Producer? System Run8me Flaring Gas Hours per Month Down Time Lost Value to Netback Wellhead Netback $2.50/MCF 99% 1% 7 $ % 5% 36 $ % 10% 73 $ % 15% 109 $0.375 Financial Gain: A 5% increase in runlme on 25,000 MCFD is $95,000 per month On- Lme projects prevent flaring at a rate of $75,000/month/MMSCFD AnLcipate 5%- 10% runlme increase over gathering and processing providers with regional or single market outlets because of reliability/redundancy built- in to the design of the Vaquero asset both with equipment and mullple markets conneclons NO single failure shuts Producer wells in. Doesn t account for gas price arbitrage at market hub, NGL value from not processing the gas as well as potenlal crude oil curtailments. 29

30 If This PresentaLon had a Facebook Page Economic Up8ck Mexico Demand Poli8cal and Regulatory Unknown Infrastructure Challenge Reliability - Realignment Around Value Vaquero - A Basin Midstream Solu8on 30

31 Status Update: Southern Delaware Basin Page Ø Love the arguably best drilling economics for producers in the country Ø In a RelaLonship with Mexican gas market demand real today and will conlnue to grow Ø Checked in with SDB Producers who need a midstream partner to create reliable supply Ø Friend Request Vaquero provides a basin- wide solulon answering the challenge of reliable and scalable supply. 31

32 ExecuLve Management Team Gary E. Conway Principal, President and CEO William W. Davis Principal Bryant H. Pahon Principal Brian W. Best ExecuLve Vice President, Business Development 32

33 Business Development Team Brian Hieh Business Development Breh Taylor Manager of Gas Supply Jus8n Benneh Business Development Christopher Seiders Vice President, Corporate Development 33

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