Alliance Pipeline BMO Western Canadian Tour September 16, 2014
Forward-Looking Information Certain information contained in this presentation constitutes forwardlooking statements. The words anticipate, expects and expected to and similar expressions are intended to identify such forward-looking statements. Although Alliance believes that these statements are based on information and assumptions which are current, reasonable and complete, these statements are necessarily subject to a variety of risks and uncertainties including, but not limited to, future operating performance, regulation, economic conditions and fundamentals affecting the oil and gas producing and marketing industries. Should one or more of these risks or uncertainties materialize or fail to materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. 2
Alliance Aux Sable Overview System Capability 1.6 Bcf/d capacity from WCSB to Chicago Transporting in excess of 130,000 bpd of NGLs 250 mmcf/d receipt capacity out of the Bakken Ability to transport 1,150 Btu/cf commingled gas Tioga lateral added 126 mmcf/d of capacity out of the Bakken Reliability over 99% 3
Strength of the Alliance Asset Underpinning the New Service Offering Alliance assets have maintained operational integrity and performance levels essentially at original operational capability No material HS&E violations or enforcement actions Completing third in-line inspection of pipeline Highly reliable asset, fulsome maintenance program and arrangement with OEM Asset base utilized throughout system Aggressive depreciation schedule 4
Competitive Advantages Unique and growing Natural Gas Liquid ( NGL ) transport capability Only pipe carrying natural gas and NGLs to U.S. Ability for producers to optimize field capital requirements and time to market Responsive new services framework Manage contract duration and staging, choose rich gas services and have toll certainty over contract term Connected to growing rich gas supply regions Value-add of Aux Sable access to U.S. NGL markets 5
Competitive Advantages Access to growing demand markets Evolving U.S. Midwest gas market Growing U.S. NGL demand and export capacity Complementary rich gas bridge to potential B.C. Liquefied Natural Gas ( LNG ) export facilities Alliance Chicago Exchange ( ACE ) services provide value during market events Strategically positioned rich gas pipeline providing timely and economic access to premium markets 6
New Services Framework Predictable and competitive fixed tolls Receipt zone and transmission services in addition to full-path service New services to enable optimization of rich gas transport and support production build up in developing resource plays US Midwest Market Hub 7
National Energy Board ( NEB ) Application for New Services Filed May 22, 2014 Consistent with July 15, 2013 announcement of Precedent Agreement process for New Service Offering Includes revised Hydrocarbon Dewpoint ( HCDP ) specification to -5 degrees Celsius Inclusion of Interruptible and Seasonal Firm Service (with full tolling flexibility) NEB issued Hearing Order on August 20, 2014 and adopted Alliance s requested written hearing format Plan to file regulatory application with Federal Energy Regulatory Commission ( FERC ) in 2015 8
Service Enhancements to Optimize Liquids Capacity Current NGL flows 9
Alliance NGL Transport Up by 59% from 2009 10 Source: Company reports
Connected to Growing Rich Gas Supply Regions ~1500 Btu/cf 1399 Btu/cf 1146 Btu/cf 1132 Btu/cf The Montney and Duvernay are forecasted to grow significantly within a 40 km radius of Alliance. These plays have a higher heat content and more NGLs than the conventional average field heat content. 11 Source: IHS AccuMap, Alliance 2013/2014 Gas Pipeline Competition Model, Hess A Bakken Producer s Regional View on Gas & NGL Markets Michael Lutz, 2013, Heat contents are based on field measurements without condensate
Alliance Markets Aux Sable Provides Value and Access to U.S. TRILOGY: Eliminates 2011 and 2012 capital expenditures of approximately $55 Million for new deep-cut gas plant CEQUENCE: Increase in realized product price ; Resulting increase to recent netbacks of approximately $3.00 per boe CELTIC: Eliminates requirements to incur additional capital expenditures of approximately 75 Million CROCCOTA: Access to United States markets for propane and butane that are larger and more competitive than in Alberta. Crocotta will also avoid the potential oversupply of propane and butane in Alberta that may push local prices even lower equates to an increase of approximately $3 per boe ENCANA: This agreement with Aux Sable supports our upstream development plans and diversifies Encana's liquids exposure SUMMIT: This agreement allows us to immediately offer our existing and future customers improved natural gas processing economics for their rich associated natural gas production North Dakota GOVERNOR J. Dalrymple: Aux Sable and Summit Midstream are playing an important role in our ongoing effort to reduce flaring and add value to our energy resources 12
Immediate and Economic Bridge for LNG Facilities Alliance an existing, economic solution with immediate access to market Capital avoidance and predictable rich gas transportation through 2020 and beyond First B.C. LNG projects still awaiting investment decisions Optionality while LNG outcomes get sorted Long-term market portfolio alternative for rich gas plays Increasing exports from U.S. Gulf Coast 13
Alliance an Outlet Until LNG Final Investment Decisions ( FID ) and In Service Dates Incremental Production Time 14
New Receipt Capacity Since 2010 About 3.6 Bcf/d of production currently connected to Alliance Since 2010, ~1.2 Bcf/d of new receipt capacity installed or approved for construction In 2013 and 2014, 10 receipt points totaling ~1.0 Bcf/d of new receipt capacity installed or approved for construction All receipt connections were producer funded 15
Canadian Shipper Progression 2013 and 2014 focused on attracting new rich gas supply to the pipe Producers seeing benefits of capital avoidance, staging commitments, rich gas flexibility and time to market Significant Montney and Duvernay interest Alliance is pleased with progress to date and NGL content of the executed deals Commercial progress and value supportive of filing NEB application for new services Significant engagement on further new receipt opportunities 2015 will see increased engagement of connected gas and downstream participants as regulatory approvals received and commercial timelines shorten 16
Growing U.S. Supply Tioga lateral placed in service September 2013 Approximately 100 mmcf/d of available firm receipt capacity in North Dakota 17
Marcellus Causing Midwest Pipelines to Reverse A number of Midwest pipelines are proposing to carry Marcellus/Utica volumes south to the U.S. Gulf Coast Among these are: ANR REX-to-NGPL Texas Eastern Transmission More than 5 Bcf/d of capacity has been proposed to bring Marcellus and Utica shale production southward Options to move volumes south on Midwest pipelines should enhance the clearing house nature of the Chicago hub, with volumes able to move to virtually any market (south to LNG as well as east and north) Alliance will continue to deliver to one of the premier destinations in North America 18
U.S. Midwest Demand Growth Source: Wood Mackenzie - Spring 2014 U.S. Midwest demand is forecast to grow approximately 2 Bcf/d 19
Alliance Chicago Exchange ACE services first offered Dec. 2011; includes Park & Loan and Wheeling Wheeling activity up from under 200,000 Dth/mo. to more than 3 million Dth/mo. Revenues tracking growing ACE awareness $ Millions 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Cumulative ACE Revenues 20
Access to U.S./International NGL Markets Critical NGL Infrastructure Canadian Demand United States Demand 2012 Source: Petral, IHS Aux Sable. 21
U.S. Ethane Supply and Demand 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 U.S. ethane demand growth from 2016 onwards will lead to balanced or short ethane markets and a recovery of ethane prices kbbls/d 2,250 US Ethane 2,000 1,750 1,500 1,250 1,000 750 500 C2 Gas Plant Supply C2 Currently Rejected Gas Plant Supply ICF C2 Demand Enterprise (Refrigerated C2) Source: Alliance, Company Reports & ICF International 22
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 U.S. Liquefied Petroleum Gas ( LPG ) Supply and Demand U.S. LPG [Propane (C3) and Butane (C4)] export capacity growing dramatically; should support North American propane and butane markets kbbls/d 3,500 3,250 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 US LPG (C3/C4) C3/C4 C3/C4 Refineries C3/C4 Imports C3/C4 Demand C3/C4 Proposed Export Facilities Source: Alliance, Company Reports, TudorPickering Holt & Petral 23
Summary Customer-oriented approach Rich gas advantage, focus capital on the drill bit Flexible suite of toll and service options providing access to premium markets Known cost and contract terms provide optionality Immediate and economic bridge for LNG facilities Re-contracting efforts are progressing well 24
Contacts Terrance Kutryk President & CEO Direct: (403) 517-6500 Email: Terrance.Kutryk@alliancepipeline.com Keith Palmer Senior Vice President & CFO Direct: (403) 517-6369 Email: Keith.Palmer@alliancepipeline.com Kevin Sundvall Treasurer Direct: (403) 517-7711 Email: Kevin.Sundvall@alliancepipeline.com www.alliancepipeline.com 25
Supplemental Information Financial Performance 26
Supplemental Information New Services Offering Hydrocarbon Dewpoint ( HCDP ) Change HCDP tariff specification rises to -5 C (23 F) from -10 C (14 F) Enables greater access to Alliance s liquids carrying capability Only long haul, natural gas pipeline shipping to U.S. at -5 C HCDP Flexible, full-path and segmented tolling options Fixed, term differentiated firm tolls Index based tolls offering basis sharing for terms greater than five years Flexible pricing for interruptible services and seasonal services 27
Supplemental Information New Services Offering Firm Rich Gas Service ( FRGS ) Allows shippers to flow gas hotter than -5 C year round Customers can ship gas with more liquids than specification Surcharge of 1 for each C/mcf in excess of -5 C Offered on a first-come, first-served basis Shipper Paired Gas ( SPG ) Shippers of lean and rich gas pair to meet HCDP specification Alliance can help facilitate pairing Eliminates need for pre-pipeline gas processing facilities Creates value proposition for lean gas 28
Supplemental Information New Services Offering Authorized Rich Gas Overrun ( ARGO ) Optimal system conditions and warm temperatures enable shipments of hotter gas (above -5 C) When conditions allow, shippers could flow additional hot gas Posted / offered daily as available Value-add opportunity for shippers, offered free of charge Priority Interruptible Transportation Service ( PITS ) Available for firm receipt and full path shippers with 3+ year terms at contracted receipt point Provides for an additional 25% of firm contracted capacity to be utilized as PITS Scheduled after firm service but before Interruptible Transportation ( IT ) First 10% at 110% of associated firm service toll, further 15% available at 125% of associated firm service toll 29
Supplemental Information New Services Offering Staging of Contracted Capacity Available to firm receipt service and firm full path service shippers that: Have firm service terms of five years or more An aggregate contracted capacity averaging at least 1,400 10 3 m 3 /d over contracted term (~50 mmcf/d) Allow for staging of contract volumes to match production targets Pay a weighted average toll over term of transportation service agreements utilizing 1, 3 and 5 year tolls as applicable Alliance Trading Pool and Ace Hub Services Enables other market participants to transact on the pipe Broadens customer base and economic opportunities for shippers 30
Supplemental Information ACE Hub ACE Hub Services and Connections: Enhanced Title Transfers Interruptible Wheeling (IW) Park and Loan (PAL) 31