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December 28, 2012 • Volume 05, No. 12

MidstreaMNewsServing the marketplace with news, analysis and business opportunities

Enbridge widens Western Canada & Bakken expansion

Enbridge plans a $6.2 billion expansion of its oil pipeline system from Western Canada and the North Dakota Bakken to refineries in Ontario, Quebec and the US Midwest. To that end, the company announced it will build an additional ~$900 million line which has its initial 300,000 bopd capacity already contracted to Marathon Petroleum to be used at its Midwestern refineries.

Under the plan, a group of projects would add ~400,000 bopd of capacity or 20% to the company’s Canada-US network. Grouped by the company as the Light Oil Market Access Program, the expansions will be operational between 2014 and 2016. Enbridge’s US affiliate Enbridge Energy Partners would pay ~$3.4 billion of the cost.

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Featured deals

Spectra spends $1.5 billion on Express-Platte oil pipelinesSpectra Energy bought the Express-Platte pipeline system from a consortium

consisting of Kinder Morgan, energy infrastructure investor Borealis Infrastructure and Ontario Teachers’ Pension Plan for $1.49 billion. The 1,700-mile-plus system from Hardesty, Alberta to Wood River, Illinois is one of three major pipelines flowing crude from Western Canada

to Rocky Mountain and Midwest refineries.

The Express is a 24-in. pipeline running 785 miles from Hardesty to Billings before continuing to Laurel, Montana and Casper, Wyoming with a capacity of 280,000 bopd and storage capacity of 1.4 MMbbl. The Platte is a 20-in. pipeline which interconnects with the Express in Casper carrying oil 932 miles primarily from the Bakken and Western Canada to Midwestern refineries. The line’s capacity ranges from 164,000 bopd in Wyoming to 145,000 bopd in Wood River. Its 343 storage tanks have storage capacity of 3.4 MMbbl.

Williams buys half of former CHK system for $2.4 billionWilliams is significantly increasing its presence in the Marcellus and Utica shales,

spending $2.4 billion to acquire half of what was once Chesapeake’s pipeline system. The Tulsa operator is taking a 50% interest in privately held Access Midstream Partners, the general partner of Access Midstream Partners LP in which Williams is

also taking a 25% interest.Access, which was

acquired from Chesapeake in June by private equity fund Global Infrastructure Partners, is buying most of Chesapeake’s remaining midstream assets for $2.16 billion concurrently with the Williams transaction. The deal with Access includes new market-based gathering and processing agreements covering various acreage dedication areas and is expected to close by year’s end. When all the deals are completed, Williams and Global will each own 50% of the midstream systems and their controlling general partner, while Global will hold 43% of the LP units. Access and Chesapeake have agreed to extend Access’ exclusivity period with respect to Chesapeake’s remaining midstream assets until March 1.

Deal adds gas gathering & processing in Eagle Ford, Utica & Niobrara.

Continues On Pg 8

Continues On Pg 10

Cont. On Pg 4

1,700-mile system runs from Alberta to the US Rockies & Midwest.

Chevron acquires 50% of Kitimat LNG & Pacific Trail pipelineChevron will acquire half ownership in both the estimated $15 billion Kitimat

LNG project and the proposed Pacific Trail pipeline to feed the project from northern British Columbia and Alberta, while 30% owners EOG and Encana will bow out. Financial terms of the deal, leaving Chevron and Apache (formerly 40%) each holding 50% in the project, were not disclosed. The transactions are expected to close

by the end of 1Q13. In addition, Chevron will

acquire ~110,000 net acres in the Horn River Basin from Encana, EOG and Apache and ~212,000 net acres in the Liard Basin from Apache. As part of that deal, Apache will sell 50% of its holdings in each basin to Chevron for $550 million. The two leasehold positions and their total 644,000 gross undeveloped acres will be operated by Apache.

“While we still believe in the viability of the Kitimat project, our decision to exit is consistent with EOG’s focus on domestic onshore crude oil production, which is generating more immediate reinvestment opportunities,” said EOG chief Mark G. Papa. Encana expressed similar sentiments saying the company had chosen to concentrate on its core business while reducing future capital commitments.

Chevron also picks up 322,000 net acres in Horn River & Liard Basins.

Continues On Pg 9

Enbridge CEO touts latest move as ‘really hitting the light oil markets.’

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MidstreaMNews 2 December 28, 2012

Inventories

Gas storage shows 72 Bcf in withdrawals in Lower 48The EIA reported a 72 Bcf withdrawal from working gas in storage in the Lower

48 states the week ending December 21, just below Bloomberg consensus estimates of 74 Bcf. Storage levels are now 2.3% higher than this time last year, and 12.8% higher than the five-year average. Gas prices have been flirting with multi-month lows

on recent warm weather and an unusual recent 2 Bcf injection.

By comparison, stocks dropped 87 Bcf last year, while the five-year average draw for the week is 140 Bcf. The weather is continuing to cause concern for investors, with forecasters expecting moderating weather into January. Commodity Weather Group’s Matt Rogers expressed “fairly good confidence” of continuing cold through the first week of January, but anticipates warming just beyond. IAF Adfisors’ Kyle Cooper said weather could see a “pretty significant warm-up” at that time, and sees Henry Hub falling to the $3.00 range if that scenario plays out.

But in the longer term, cold could win out and help put a floor under pricing. Weather Services International projects below average temps in January and February, in contrast to 2012’s incredibly mild winter. And until conditions moderate, the cold should stick nicely due to another storm this weekend. Such events help sustain cold weather longer than dry cold systems, according to WSI senior meteorologist Dan Leonard. But uncertainty persists; the forecast “gets pretty murky” after next week according to Tradition Energy’s Gene McGillian.

In an analyst’s note Baird’s Michael Hall said the firm is still generally comfortable with storage outlook given relative market tightness since the beginning of November (+0.7 Bcfd vs. +2.8 Bcfd last year).

The PLS MidstreamNews covers the midstream, downstream and infrastructure sector that includes news and analysis on gathering, marketing, pipelines, mergers, acquisitons, capital and performance.

In addition to the news, the Midstream has deals for sale, coded alpha-numerically. Clients interested in any listing details can contact PLS with provided listing code(s).

PLS Inc. One Riverway, Ste 2200 Houston, Texas 77056

713-650-1212 (Main) 713-658-1922 (Facsimile)

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about Pls

Current us Petroleum stocks by type (MMbbl)For Weeks Ending

12/21/12 12/14/12 Net Change 12/23/11Crude Oil (Excluding SPR) 371.1 371.6 -0.6 327.5

Motor Gasoline 223.1 219.3 3.8 217.7

Distillate Fuel Oil* 119.4 117.0 2.4 140.4

All Other Oils 386.0 388.6 -2.6 355.4

Crude Oil in SPR 695.0 695.0 0.0 696.0

Total 1,794.5 1,791.5 3.0 1,736.9

*Distillate fuel oil stocks located in the "Northeast Heating Oil Reserve" are not included.Note: Data may not add to total due to independent rounding.Source: EIA Weekly Petroleum Status Report

Current Natural Gas stocks by region (bcf)

Current Stocks

12/21/12

1-Week Prior

Stocks 12/14/12

Net Chg From

Last Wk

Prior 5-Yr (2007-11) Average

Percent Difference From 5-Yr Average

East Region 1,883 1,925 -42 1,754 7.4%

West Region 520 538 -18 439 18.5%

Producing Region 1,249 1,261 -12 1,046 19.4%

Total Lower 48 3,652 3,724 -72 3,239 12.8%

Source: Energy Information Administration: Form EIA 912, "Weekly Underground Natural Gas Storage Report" and the Historical Weekly Storage Estimates Database. Row and column sums may not equal totals due to independent rounding.

EQT adds 200 miles of pipe & 15 Bcf of storage in Marcellus

EQT picked up ~200 miles of pipeline and four storage pools with 15.1 Bcf of capacity in the Marcellus as part of its $720 million sale of its Equitable Gas distribution business to Peoples Natural

Gas. The deal comes as EQT continues to focus on its growing production

business. Also, Peoples agreed to long-term contracts for transmission and storage services with EQT of ~35 Bcf annually.

Equitable Gas owns ~4,000 miles of pipeline and provides natural gas to ~275,000 customers in Pennsylvania, West Virginia and Kentucky. EQT expects to receive regulatory approvals of the sale by the end of 2013.

Meanwhile, EQT said it will reduce its annual dividend effective January 2013. The new rate of $0.12/share reflects the blend of EQT’s two remaining core enterprises: a dividend-supporting midstream business and a growing production business.

Gets Marcellus assets plus $720 million in sale of gas distribution business.

Midstream A&D

December 21 inventory draw was below consensus estimates of 74 Bcf.

Access PLS’ archive for previous midstream newsFor general inquiries, e-mail info@plsx.com

Volume 05, No. 12 3 iNfrastructure

Dominion gets green light on Marcellus expansions

FERC gave Dominion the go-ahead on two Marcellus gas pipeline projects, saying neither will adversely affect the environment. The $67 million Tioga expansion covers 19 miles in five Pennsylvania and New York counties, while the Sabinsville-to-Morrisville project runs 3.5 miles in northern Pennsylvania.

The Tioga project calls for minor modifications to several existing facilities to provide an additional ~260 MMcfd firm transportation, ~150 MMcfd of which will be delivered to Leidy, an existing interconnect with Williams Partners’ Transcontinental pipeline. The rest will be sent to a new interconnect with Texas Eastern Transmission at Dominion’s Crayne compressor station south of Pittsburgh. The $17 million Sabinsville-to-Morrisville line will allow Tennessee Gas Pipeline to move its receipt point from Dominion south from North Sheldon, N.Y. to Sabinsville, Pa. It will provide capacity of ~90 MMcfd. Both lines will be built from 24-in. pipe and are expected online in November 2013.

Meanwhile, Dominion gained FERC approval to create a buffer zone around its Sabinsville Pool storage facility as a protective measure against damage from Marcellus shale fracking. The company proposed a 2,000-ft protective boundary around the 35.6 Bcf capacity storage facility.

Dominion already has the rights to ~90% of the buffer zone which was opposed by local gas producers Ultra Resources and Shell which said Dominion did not demonstrate that such a large protective area was needed.

TransCanada says XL on target despite brief Texas hold-upTransCanada said a temporary restraining order that barred work in Texas on

the southern segment of the Keystone XL pipeline will not affect the company’s plans to have the line in service by late 2013. A Nacogdoches Co. judge granted the injunction—since lifted—after ruling in favor of a landowner who argued TransCanada misrepresented its intentions when it negotiated to build the pipeline section

through his property. In seeking the ruling,

landowner Michael Bishop of Douglass Co. said when plans for the Keystone XL were presented to property owners the pipeline was designated to carry crude oil, but will instead carry diluted bitumen from the Canadian oil sands region. Environmentalists are concerned the heavier bitumen would be more difficult to clean than crude oil if leaks occur.

The restraining order was originally to remain in effect two weeks until a December 19 hearing but was rescinded after six days on December 14, when TransCanada filed for a separate ruling on the work stoppage. The company said it had already begun clearing the landowner’s property.

The 485-mile Gulf Coast Project will stretch from Cushing, Oklahoma to South Texas. A 47-mile lateral is planned to transport oil to refineries in Houston. TransCanada began building the Keystone XL southern segment August 9 near Livingston, Texas.

In late November, an appeals court backed a trial court decision that will allow TransCanada to use eminent domain in Texas to take land for construction of the pipeline. Texas landowners had challenged the initial ruling, saying the court did not have standing because the XL is an interstate pipeline and Texas “common carrier” rules do not apply.

Meanwhile, the state of Montana approved easements to allow the Keystone XL to cross state land which includes the Missouri and Yellowstone Rivers. The state land board sold the package of 50-year easement to TransCanada for $741,000. The approvals were made contingent on a presidential permit.

Pipeline modifications will provide 350 MMcfd in additional capacity.

Dominion gains approval for fracking buffer zone at its storage facility.

Landowner argued diluted bitumen is not crude oil as defined by Texas.

Montana approves Keystone to cross Missouri & Yellowstone Rivers.

Dominion & Caimen II form $1.5 billion Utica JVDominion and Caimen Energy II formed a $1.5 billion 50:50 JV to serve Utica

shale gas producers in Ohio and Pennsylvania. Blue Racer Midstream’s service includes gathering, processing, fractionation, and NGL transportation and marketing.

Dominion will provide midstream assets while Caimen II will contribute equity through commitments from its owners Williams Partners ($380 million through

2014), EnCap Flatrock Midstream (up to $285 million), Highstar Capital (up to $95 million) and its management.

Dominion’s contributions to the JV include its east Ohio rich gas gathering network, along with other portions of its gathering system as more lines are converted to rich gas gathering operations. With the deal, the gathering system could expand to 2.0 Bcfd. Other contributed assets include the 200 MMcfd Natrium extraction plant which can fractionate 36,000 bpd of liquids into industrial propane, butane, ethane and other products.

The JV will allow Dominion to capture the value of its assets in the Utica, while supporting its 5-6% operating

earnings per share growth targets and accelerating midstream capital spending by up to $800 million. “Dominion brings well-positioned assets and experienced operations for gathering, processing, fractionating and delivering natural gas and liquids produced from the Utica shale field,” said Caimen CEO Jack Lafield.

Caimen II is owned by Williams Partners (47.5%), EnCap Flatrock (35.6%), Highstar Capital (11.5%), and management (4%).

New company, Blue Racer Midstream, will service Utica producers.

Caimen II providing up to $800 million in equity commitments.

Pipeline

Dominion

www.plsx.com

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MidstreaMNews 4 December 28, 2012

enbridge’s light oil Market access Initiative

Clearbrook

Superior

Sarnia

Patoka

Toledo

Montreal

Westover

Hardisty

Su

S i

Westover

ToTT le

Potential Growth Projects:

Sandpiper Pipeline

Southern Access Expansion

Southern Access Extension

Chicago Connectivity Expansion (Line 62)

East of Chicago Expansion (Line 6B)

Line 9 Expansion

1

2 5

6

1

2

3

4

5

6 P

Flanagan 4

3

Chicago

Source: Enbridge December 4 Presentation via PLS docFinder www.plsx.com/finder

While Enbridge previously announced other components of the expansion—which stretches from central North Dakota to Montreal—the 165-mile Southern Access extension in Illinois from the Flanagan terminal in Pontiac to Patoka is new to the picture,

expanding Enbridge’s light oil transmission further south.“That’s really the main driver as opposed to other markets like Cushing,

for example, where you probably don’t want to see more light barrel [oil] showing up there if you’re a producer,” said Enbridge CEO Al Monaco during a Q3 call.

Enbridge has announced a binding open season for capacity on the proposed Southern Access extension. The 24-in. pipe already has enough capacity commitment from an unspecified anchor shipper to go forward with construction. The open season ends January 18; the pipeline is expected to be online in early 2015.

Meanwhile, Enbridge has applied with Canada’s National Energy Board for permission to reverse a section of oil pipeline running ~397 miles from Montreal to the North Westover terminal in Ontario. The company also wants to hike capacity 25% to 300,000 bopd.

Gains attributed to earnings from liquids pipelines—Boosted by Q3 profits from increased volumes on its liquids pipeline operations,

Enbridge reported earnings of $189 million compared with a $5.0 million loss in 3Q11. The Canadian company showed adjusted earnings of $269 million for Q3 and $922 million over the last nine months, representing YOY increases of 13% and 11%, respectively. Enbridge said it benefited from increased earnings on the Canadian Mainline ($1.62 billion, up 3.3% YOY) and Spearhead ($155 million, up 176% YOY) pipeline systems, as well as its 50% interest in the Seaway pipeline.

Pipelines

Southern Access expansion extends Enbridge transmission further south.

•Kinder Morgan’s Pony Express project to transport crude 690 miles from the Bakken to Oklahoma—in part through a pipeline converted from gas—received FERC rate structure approval. In addition

to the conversion of 432 miles of pipe between Guernsey, Wyoming and north-central Kansas, the project requires a new 260-mile

segment from the Pony Express mainline to Oklahoma and an extension to Cushing.

•FERC approved a Tres Palacios Gas Storage request to build a 19.7-mile extension from its pipeline system to connect the company’s ~57.3 Bcf storage facility in Matagorda and Wharton Cos., Texas to Copano’s Houston Central

gas processing plant in Colorado County.

The new 24-in. line will be built next to an existing pipeline right-of-way. The existing Tres Palacios header pipeline system interconnects with 10 interstate and intrastate pipelines.

•A 20-in. NiSource transmission line exploded December 12 near the company’s Columbia Gas Transmission station near Sissonville, West Virginia. Kanawaha Co. officials said the blast destroyed five houses; there were no serious injuries. Investigators found areas of pipe “consistent with external corrosion.”

•Pennsylvania Gov. Tom Corbett endorsed a plan that would allow gas pipelines to share rights-of-way with roadways. His administration also wants the state public utility code changed to promote cooperation between the US Army Corps of Engineers and state regulators concerning permits to allow gas pipelines to cross streams. The recommendations are part of the state’s proposed Marcellus shale law also requiring increased notification efforts for property owners affected by pending pipeline construction.

Pipeline Briefs

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Inter Pipeline to flow diluent for Suncor oil sandsInter Pipeline Fund will transport 10,000 bpd of diluent to Suncor Energy’s

oil sands operations under the terms of a five-year agreement on its Polaris pipeline system. The diluent will be moved on the 12-in. mainline from receipt points in the

Edmonton area to a new $8.0 million Sunrise metering station northeast of Fort McMurray, Alberta. The metering station will be built

in the coming months to handle Suncor volumes and the new facilities are expected in service by May 2013. The agreement is projected to generate $10 million per year in EBITDA over the life of the contract. The Polaris mainline went online in August when it began shipping diluent to the Kearl oil sands project with operator Imperial Oil signing for 60,000 bpd.

$8 million metering station will be built near Fort McMurray, Alberta.

Enbridge widens expansion plans Continued From Pg 1

Access PLS’ archive for previous midstream newsFor general inquiries, e-mail info@plsx.com

Volume 05, No. 12 5 iNfrastructure

•Atlas Pipeline closed on its previously announced acquisition of Cardinal Midstream. Final cash consideration totaled $603.4 million which reflected a $3.4 million upward adjustment. Atlas now owns 100% of the 120 MMcfd cryogenic processing plant in the Arkoma Woodford Basin, ~60 miles of gathering lines for both rich and lean gas and 28,500 hp compression capability including a 42 MMcfd compression facility.

•Delaware state judge Leo Strine Jr. approved a $110 million settlement reached between El Paso and shareholders who sought to block the $21.1 billion sale of the company’s midstream assets to Kinder Morgan last year due to alleged conflicts of interest. Legal fees will absorb 24% of the payout. Investment bank Goldman Sachs waived a $20 million advisory fee.

•Alaska Gov. Sean Parnell will likely introduce legislation to provide $355 million to stimulate an LNG project that partners BP, ConocoPhillips and ExxonMobil hope will eventually ship North Slope gas to Asia. Parnell wants to authorize $275 million in bonds and $50 million in general fund appropriations for the project as well as $30 million in tax credits to ensure the project also provides LNG to the Fairbanks-area market. Parnell’s plan projects a $220 million liquefaction plant producing up to 24.7 Bcfd in 4Q15, expandable to 54.8 Bcfd.

•Genesee & Wyoming signed a long-term contract to serve a $900 million Utica NGL fractionation hub under joint development by EV Energy Partners and Access in Scio, Ohio. Genesee will build a 1-mile low-speed rail section and upgrade a 3-mile storage track to serve the hub. The rail is expected to ship 10,000 carloads of NGL a day beginning in 2Q13 when the plant goes online.

•NGL Energy Partners will pay $45 million for all of the limited liability interest of Pecos Gathering & Marketing

which operates crude purchasing, gathering

and transport assets in the Permian and Eagle Ford. Pecos ships 60,000 bopd and operates ~140 trucks in the regions.

Midstream News Briefs

Gas exporters weigh pros & cons of Canada vs. USCompanies looking to export gas to the lucrative Asian market which is paying

almost $13/MMbtu more than North America have a difficult decision to make: Should they export gas from Canada or the US? Canada and US prices aren’t that much of an issue, but politics and infrastructure are. Companies are starting to place bets based on

which factors they think are more important.

US barriers to gas export are primarily political. The country has never exported much gas and is having difficulty conceiving the idea that it might become a major supplier. Although the shale revolution has transformed the US gas industry and driven down prices, debate rages over how to make the best use of the shale gas windfall. Many manufacturers think that allowing unchecked LNG exports would erode the competitive advantage home-grown industries will realize from low gas prices. As Andrew Liveris of Dow Chemical put it, higher Asian gas prices linked to the price of oil could “bleed back” into US gas prices.

A study from NERA Economic Consulting commissioned by the US Department of Energy and published in

early December minimized that risk, concluding that even unlimited LNG exports would raise US prices by a bit over $1.00/MMbtu max. The DOE said it would review other applications “on a case-by-case basis” in a tacit acceptance of Liveris’ suggestion that the government should grant approval to only “a few” projects at first.

In contrast to its US neighbor, Canada has been exporting gas for years and is comfortable with the idea. However, compared to the US, Canada needs to spend much more time and money to develop exporting infrastructure. The country’s most promising gas fields are located in the Montney and Duvernay shales of British Columbia and Alberta, which are several hundred miles from the coast. To get that shale gas to market, Canada will need to build not only an LNG plant and tanker dock but new pipelines. Although such an LNG export project could face political resistance industry officials think that can be surmounted, pointing out that pollution risk is lower for gas than for oil routes.

Midstream News

Demand for Canadian gas will double by 2035, driven in part by LNG.

Canadian LNG projects await FID including a Shell JV with Asian NOCs.

Third major gas line proposed to serve Florida demandFlorida Power & Light issued a request for proposals to build a third major gas

pipeline serving Florida. The proposed Southeast Pipeline would provide 400 MMcfd of capacity for FPL beginning in 2017 with future increases in capacity.

Two segments are envisioned: an upstream Florida Interstate Connection line would originate at an existing hub in western Alabama, running east and then south to a new hub to be built in Central Florida allowing interconnect with Florida’s existing pipeline systems. From there, a downstream Florida Southeast Connection line would transport gas to an interconnect with FPL’s system in Martin County.

With the two existing major gas pipelines nearing full capacity, the state needs new gas transport infrastructure by 2017 to meet growing demand in the power sector, the company said. The new line is also intended to reduce Florida’s exposure to offshore sources in the Gulf of Mexico and supply interruptions caused by tropical weather.

“A new, third pipeline system that includes a hub to interconnect all three pipeline systems in Central Florida is essential for the continued reliability and security of the state’s supply,” said FPL President Eric Silagy.

Interested companies can bid on one or both segments of the 700-mile system. The specific routes will be selected and proposed by companies submitting bids.

The new line from Alabama would provide 400 MMcfd starting in 2017.

Find more on the midstream sector at

MidstreaMNews 6 December 28, 2012

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Total to buy $6.3 billion of Sabine Pass LNG over 20 yearsTotal will buy LNG from Cheniere Energy Partners’ Sabine Pass facility on the

Louisiana coast under a $6.3 billion agreement. The 20-year contract lets Cheniere go forward with an expansion at the Sabine Pass export terminal—an effort that would make the plant the first in the contiguous US. The deal, which is worth ~$314 million annually to the company, calls for Total to purchase 91.25 Tbtu of LNG annually plus 13.5 Tbtu of seasonal LNG volumes once five-train operations begin. The volumes represent ~2.0 mtpa of ~4.5 mtpa nominal capacity

at the fully operational liquefaction plant.The agreement includes up to 10

years in extensions. The LNG will be loaded onto Total vessels at a price indexed to the monthly Henry Hub gas price plus a fixed component. Currently two trains are being constructed at Sabine Pass with two more expected to start construction in 2013; a fifth train will go into operation as early as 2018. As previously announced, a partial assignment agreement allows Cheniere to gain access to services under Total’s terminal use agreement. This includes Total’s berthing and storage capacity.

Sempra files NGL building permit at Cameron LNG terminal Sempra Energy filed its FERC permitting application to add an NGL liquefaction

and export plant at its existing Cameron LNG terminal in Hackberry, Louisiana. The liquefaction facility will use Cameron’s existing assets which include two marine berths capable of accommodating Q-Flex-sized LNG ships, three LNG storage tanks of 17 MMcf capacity, and vaporization capability for regasification services of 12.8

mtpa. The new liquefaction facility will be comprised of three trains with a total export capability of 11.3 mtpa.

Cameron LNG already received DOE approval to export LNG to countries with which the US has qualifying free-trade agreements. The company’s application to export to non-FTA countries was filed in December 2011. FERC will review the application and conduct an environmental study before issuing the permit. The facility is expected to begin delivering LNG to international markets in 2017.

Total deal includes up to 10 years in extensions based on Henry Hub prices.

Crosstex begins more NGL& fractionation expansion

Crosstex Energy is moving forward with Phase 2 of the $680-700 million Cajun-Sibon NGL pipeline extension and fractionator in Louisiana. The expansion will increase pipeline capacity by ~70% to 120,000 bpd and is expected online in 2H14.

Phase 2 will also involve the installation of a 100,000 bpd fractionator adjacent to the Crosstex’s Plaquemine processing plant, the modification of the Riverside fractionator facility and the construction of a 32-mile extension of its Bayou Jack lateral to provide gas services to the Mississippi River corridor.

Additionally, four pump stations totaling 13,400 hp will be added as well as 57 miles of NGL pipeline that will originate at the Eunice fractionator to the new fractionator.

Through a 10-year agreement with Dow, Crosstex will deliver up to 40,000 bpd of ethane and 25,000 bpd of propane produced at the Plaquemine fractionator into Dow’s Louisiana pipeline system.

Phase 1 construction of the project is underway and it is expected that both the Phase 1 pipeline connecting the Eunice facility to Mont Belvieu supply lines and the expanded fractionation plant will be online by mid-2013.

Pipelines

Crosstex adding a 100,000 bpd fractionator near processing plant.

Crosstex GOPLS provides clients with research, insight and transaction opportunities...

24 | 7 | 365Source information at www.plsx.com

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LNG

us Midstream Market Movers—last 30 days Source: Capital IQ

Company Ticker$/Share

12/27/12$/Share

11/27/12 % Change

Top

5

Cheniere Energy LNG $18.57 $15.62 19%

Ship Finance International SFL $15.95 $15.38 4%

Cheniere Energy Partners CQP $21.21 $20.50 3%

Kinder Morgan KMI $34.77 $33.76 3%

Targa Resources TRGP $50.99 $49.51 3%

Bot

tom

5

ONEOK Partners OKS $53.03 $58.70 -10%

Buckeye Partners BPL $45.00 $49.29 -9%

Crestwood Mid-stream Partners CMLP $20.97 $22.78 -8%

Atlas Pipeline Partners APL $30.99 $33.51 -8%

Golar LNG GLNG $36.47 $39.03 -7%

Access PLS’ archive for previous midstream news

Volume 05, No. 12 7 iNfrastructureDownstream

BP’s upgrades to 413,000 bopd Whiting refinery slowedBP’s planned $4.0 billion upgrade of its 413,000 bopd capacity Whiting, Indiana

refinery has been slowed by an already month-plus delay in restarting its refurbished 260,000 bopd sour crude unit—now expected online in May—and a lawsuit

against contractors. The unit was taken offline

in late November for an anticipated four-month shutdown in part to address $400 million in emission-cutting measures resulting from a settlement with the EPA, US Justice Department and state of Indiana. The delay is expected to push back to mid-2013 the timetable on the facility’s new 102,000 bpd coker, originally expected online by year’s end. The coker is seen as the key to BP’s strategy to process more Canadian sour crude.

Meanwhile, BP filed suit against some of its contractors, alleging defective fireproofing work and negligence. The company claims that thousands of tons of new structural steel used in the upgrades were coated with defective material and as a result “degraded prematurely.”

BP does not expect needed repairs to delay its schedule further. BP spokesman Scott Dean told Dow Jones the major expansion to convert the Whiting refinery to sour crude (85%) is 80% finished and still expected to be operational in 2Q13.

BP’s 120,000 bpd coker was expected online at year’s end, now mid-2013.

MarkWest Energy brings 200 MMcfd Mobley 1 online

MarkWest Energy began operating its first Mobley processing facility in Wetzel Co., West Virginia. The 200 MMcfd plant is currently at ~60% utilization in support of Marcellus shale producers Magnum Hunter, EQT and others. MarkWest expects its 120 MMcfd second Mobley plant to go online in 1Q13, followed by a 200 MMcfd facility in 4Q13. NGLs recovered at Mobley are transported by MarkWest’s gathering network to its 60,000 bpd fractionation complex in Washington Co., Pennsylvania.

Magnum sub Eureka Hunter began flowing ~36 MMcfd directly to the plant and expects to ramp up volumes to ~100 MMcfd by late January as additional production is brought online. Eureka Hunter and Triad Hunter have committed to ~95% of Mobley 1’s gas processing capacity beginning in April.

Meanwhile, Eureka Hunter has completed the bore under the Ohio River and will begin laying multiple pipelines in Ohio to gather gas and condensate from the Marcellus and Utica.

Sasol begins design of $14 billion Louisiana GTL refinerySouth Africa-based Sasol will begin engineering and design work on the first US

refinery to convert gas into diesel, which can be sold at substantially higher prices. The $14 billion facility is planned for northwest of Lake Charles, Louisiana in Westlake.

The plant would begin operations in two phases in 2018 and 2019 and produce 48,000 bpd using ~1.0 Bcfd of gas. As part of its US expansion, Sasol will go forward with a ~$7.0 billion ethane cracker at the Lake Charles facility. It is expected

to produce 1.5 mtpa of ethane and go online in 2017.

Sasol plans to make a final investment decision in 2014. GTL plants cost about three times as much to build as traditional refineries, but the price of US gas is the lowest in the world and inventories are at record high levels. If the project goes forward, it will be the largest investment in the state’s history, according to Gov. Bobby Jindal.

Alberta GTL project on hold for at least a year—Sasol has delayed a proposed $8.0 billion gas-to-liquids project in Alberta for at

least a year as part of a prioritization of its portfolio. The company had set a deadline of the end of December to decide whether to proceed with a $200 million front-end engineering and design study of the proposed project. Under that timetable, construction on the facility, to be located in Strathcona Co. north of Fort Saskatchewan, would have begun in 2015 and be completed by 2019.

“The feasibility study was successfully completed in 2012 and the required regulatory application and land procurement processes are underway,” the company said in a statement. “However, in accordance with the need to prioritize Sasol’s growth portfolio, this investment opportunity will be phased after the integrated Lake Charles GTL and cracker projects. A decision to proceed with FEED will be considered at a later stage.”

Sasol was originally partnered with Talisman on the facility, but Talisman dropped out of the project last summer. “We believe the economics looked marginal and the capital costs and risks associated with the actual building of the plant are too great for Talisman to step into today,” said then-Talisman CEO John Manzoni.

The company won’t make a decision on the FEED study until at least 2014, Sasol Canada president Nereus Joubert told the Calgary Herald.

If all goes well, the project will be the biggest ever in the state of Louisiana.

Construction could have started in 2015 if FEED study had moved ahead.

Magnum Hunter sub begins direct flow of 36 MMcfd & expects ramp-up.

•DCP Midstream and DCP Midstream Partners will build a 200 MMcfd cryogenic plant as part of the DCP system to provide one-stop service to Eagle Ford shale producers. The

Goliad, Texas facility is expected online in 1Q14.

The JV between DCP Midstream (67% owner) and its general partner (33% owner) was announced in November.

•Dow Chemical applied for a federal air emissions permit to build a previously announced $1.7 billion ethylene plant in Freeport, Texas. Dow expects to begin construction of the facility in January

2014 and plans to begin production later that

year. The company will spend $4.0 billion in Texas and Louisiana through 2017 in an effort to increase ethylene and propylene production.

Downstream Briefs

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MidstreaMNews 8 December 28, 2012

Plains buys CHK Eagle Ford assets for $125 million

Plains All American Pipeline spent $125 million for Chesapeake Energy liquids midstream assets in the Eagle Ford consisting of ~40 miles of pipelines, 15,000 bbl of storage capacity, 300,000 bbl of under-construction storage capacity and a truck unloading terminal. Chesapeake also provided long-term acreage dedication in Webb and Dimmit Cos., Texas. Plains will connect the assets to its existing oil and condensate gathering system.

Earlier in the year Plains spent ~$190 million on projects in the Eagle Ford and along the Gulf Coast, and late last year it acquired ~120 miles of crude oil and condensate gathering and transportation pipelines from Velocity Midstream for $400 million—currently in advanced stages of construction. Plains also formed an oil pipeline JV with Enterprise for projects in the region.

Meanwhile, Plains closed on two public offerings of debt for a gross $750 million in proceeds. The larger offering consisted of $400 million in 2.85% senior unsecured notes due 2023 priced at 99.752% of par for yield to maturity of 2.878%. Plains also sold $350 million in 4.3% senior unsecured notes due 2043 at 99.925% of par for yield to maturity of 4.304%. Net proceeds of $742 million will be used to repay credit facility borrowings and support general partnership purposes. Plains said repaid debt may be reborrowed as necessary to fund expansion capex, acquisitions or other purposes.

Plains reported $6.38 billion in total long-term debt in Q3. With only $300 million in “credit facility and other” Q3 debt the new offerings will at least grow total long-term debt by 7%, assuming the entirety of credit facility debt is paid. Joint book-running managers were Wells Fargo, Barclays, Citigroup, SunTrust and UBS.

For Williams, the acquisition adds gas gathering and processing assets in the Eagle Ford, Utica and Niobara liquids-rich plays and expands Access’ existing position in both the Haynesville and Marcellus dry gas plays. With the move, Williams increases its opportunities in unconventional producing areas with 8.7 million acres under long-term dedications: the Eagle Ford, Haynesville, Barnett, Permian, Granite Wash, Colony Wash, Mississippi Lime and Niobrara. Williams will have an average throughput of ~3.9 Bcfd and more than 5,800 miles of

gas gathering pipelines. The deal “allows us to

get very large-scale positions in basins as opposed to having to go in and get struggling positions in basins and try to build those up,” said Williams CEO Alan Armstrong during a conference call. In the Marcellus, fee-based volume growth is significant but production still awaits more infrastructure. It is there and in the Utica that Williams’ build-outs have been concentrated. Williams is now on track to deliver up to $12.2 billion of new projects by 2014—almost all fee-based.

Meanwhile, Williams priced a public offering of $850 million in 3.7% senior notes due 2023 at a price of 99.722% of par. The company plans to use part of the net proceeds to finance the deal. UBS Investment Bank, Barclays and Citigroup are acting as joint book-running managers for the offering. Also, Access announced pricing of a $1.4 billion public offering of senior notes due 2023 and bearing 4.875% annual interest. A portion of net proceeds will go toward its purchase of Chesapeake assets.

“The acquisition of these midstream assets is a transformational opportunity for Access,” said Access CEO J. Mike Stice. “Following this transaction, Access will become the largest gathering and processing MLP as measured by invested capital and throughput volume and will have a substantially diversified portfolio with a critical

midstream position in the most prominent liquids-rich basins in the United States.”

Credit rating agencies called the transactions credit-neutral in large part because Williams’ liquidity is expected to remain strong due to its cash resources. Standard & Poor’s analyst Michael Grande told Shale Daily that Williams’ investment in Access “will add significant resource potential and geographic diversity” which will improve the company’s business risk profile.

Meanwhile, Chesapeake said it will support Williams’ development of a proposed NGL pipeline that would connect liquids-rich Marcellus and Utica producing areas in the Northeast to the Gulf Coast. Williams is developing this project as a large-scale industry solution to support shale-producing areas in the US Northeast.

Plains adds ~40 miles of Eagle Ford pipeline & 15,000 bbl of storage.

If Plains pays down all credit facility debt, long-term debt grows 7%.

Williams buys half of former CHK system Continued From Pg 1

Williams on track to deliver up to $12 billion in new projects by 2014.

Access chief sees transactions as a ‘transformational opportunity.’

Investment adds to Williams scale & diversity

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Volume 05, No. 12 9 iNfrastructure

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Midstream A&D

Ultra sells its Wyoming gas gathering for $230 million

Ultra Petroleum sold all of its midstream assets in the Wyoming Pinedale Anticline for $205 million cash and $24 million in equity securities to a new partnership between CorEnergy and Prudential Insurance’s Energy

Finance Group. The assets consist of 150

miles of gas gathering lines along with 107 receipt points and four above-ground fractionators.

Ultra controls more than 53,000 net acres in and around the 90-sq-mile Pinedale field and will continue to operate the gathering system through a lease agreement that calls for yearly volumes-based rent of at least $20 million over the first 15 years, along with payments based on liquids produced.

CorEnergy CEO David Schulte called the acquisition “a significant step in our transition to become a real estate investment trust by acquiring high-quality energy infrastructure assets with reliable cash flows.” CorEnergy contributed $130 million, while Energy Finance provided $30 million. The remainder will be financed in a non-recourse debt issued by the partnership.

CorEnergy will also offer 18.5 million shares of common stock with underwriters having a 30-day option for up to an additional 2.775 million shares. BofA Merrill Lynch, KeyBanc Capital Markets, RBC Capital Markets, Wells Fargo Securities and Stifel Nicolaus Weisel will be joint bookrunning managers.

Wells Fargo called the sale “neutral to slightly positive” for Ultra saying the $20 million rent expense associated with the deal would lower the company’s valuation range to $21-$25 from $23-$27.

CorEnergy & Prudential partnership buys 150 miles of gas gathering lines.

Deal will help CorEnergy transition to a real estate investment trust model.

Chevron already has major LNG projects under development: In Angola the company owns ~36% interest in a 5.2 mtpa plant, while in Australia it owns a ~64% stake in the 8.9 mtpa Wheatstone plant under development on the West Pilbara coast and the Gorgon project which will contain an LNG plant on Barrow Island.

But Kitimat is a higher-impact project because it “is ideally situated to meet rapidly growing demand for reliable, secure and cleaner-burning fuels in Asia, which are projected to approximately double from current levels by 2025,” said Chevron vice

chairman George Kirkland.The proposed two-train

LNG project is currently in its FEED phase and has a 20-year Canadian National Energy Board license to export 10 mtpa of LNG. The 290-mile Pacific Trail Pipeline will provide a direct connection between the Spectra Energy pipeline system and the Kitimat LNG terminal. Chevron will operate the LNG project while Apache will operate the upstream resources.

Encana & Fergus plan LNG facility for domestic use—Encana and Fergus LNG plan to build a 50,000-gallon per day LNG facility

~310 miles northwest of Edmonton, Alberta. The plant is expected to be online in 4Q13 and will be among the first in Canada to produce LNG fuel for high-hp engines used in drilling rigs and pressure pumping services.

The site is located strategically amid growing energy industry activity in northwestern Alberta and northeastern British Columbia and both companies plan to use the fuel for internal operations. Encana said it saved $12 million in fuel costs by using natural gas instead of diesel in drilling rigs and company trucks in 2011 alone and expects better results for 2012.

The specialized fuel is also used in rail, mining and remote power generation operations; a Canadian National Railway test train is currently running on the fuel.

Apache becomes 50:50 Kitimat LNG owner; EOG & Encana exit the venture.

Chevron buys half of Kitimat LNG project Continued From Pg 1

NuStar sells $100 million refinery, looks to Eagle Ford growthNuStar Energy sold its San Antonio refinery and related assets to specialty

hydrocarbons producer Calumet Specialty Products for $100 million plus closing day inventory of ~$15 million. Central to the deal—expected to close by year’s end—is the 200,000 bbl Emendorf, Texas terminal purchased out of bankruptcy for $41

million in April 2011 and in which NuStar has invested ~$54 million. NuStar announced it wanted to sell the assets in November as

part of its strategy to move away from margin-based refining and toward its fee-based pipeline and storage operations.

To that end, the company signed a long-term shipping agreement with ConocoPhillips that supports a $10-12 million expansion of NuStar’s South Texas crude pipeline system in the Eagle Ford. A planned NuStar pipeline will run from a planned 100,000 bbl terminal near Pawnee, Texas to NuStar’s existing 12-in.

pipeline system between Pettus and Three Rivers, Texas.

NuStar will connect its 12-in. pipeline to its 600,000 bbl Oakville, Texas terminal for crude delivery to the 1.6 MMbbl North Beach terminal. From there the crude will be transported to Corpus Christi along an existing 16-in. pipeline to new connections to refineries. The pipeline expansion is expected online in 4Q13, while new dock facilities will be operational in 1Q14.

Meanwhile, for the second time since announcing its Niobrara Falls project, NuStar extended the pipeline’s open season—this time until Febuary 15. The new pipeline would ship crude from the Niobrara shale near Plattsville and Watkins, Colorado to Wichita Falls, Texas. NuStar expects Niobrara Falls to be fully operational in 1Q14.

NuStar moving from margin-based refining to fee-based pipelines & storage.

Niobrara Falls pipeline project gets a second open season extension.

Ultra Petroleum

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MidstreaMNews 10 December 28, 2012

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Spectra expects the transaction to close in 1H13 and be immediately accretive to earnings, with expected full-year 2013 EBITDA of ~$130 million and full-year annual EPS accretion in the $0.03-$0.05/share range. The company sees the system as a platform for growth that will allow it to buy other crude and refined product assets.

Meanwhile, midstream subsidiary Spectra Energy Partners announced

closure of a ~5.46 million-unit equity offering priced at $27.60/unit for gross proceeds of $150.8 million. The offering included full exercise of a 712,500-unit

overallotment option. Spectra said net proceeds would fund capex and acquisitions. Pending that, proceeds will be held as cash or invested in short-term securities.

The offering was priced 3.5% below the prior day’s close of $28.60/unit, and units fell 4.7% on news of the offer. However, they quickly rebounded and moved even higher than pre-offer pricing days later, leveling out in the $29.50/unit range and staying there. The capital raise also diluted equity holder interest 5.6%. Joint book-running managers were Wells Fargo, Citigroup, Deutsche Bank, UBS and Credit Suisse.

Midstream A&D

Spectra spends $1.5 billion on pipelines Continued From Pg 1

Spectra's new Express pipeline has a total capacity of 280,000 bopd.

Tesoro buys Chevron products system for $400 millionTesoro bought Chevron’s Northwest Products system for $400 million. The

assets include the 760-mile products pipeline from Salt Lake City, Utah to Spokane, Washington and Northwest Terminalling Co. which consists of refined products terminals at Boise and Pocatello, Idaho

and Pasco, Washington.The pipeline receives

product from five refineries and one pipeline in the Salt Lake City area and is the main transportation option from Salt Lake City to Pocatello, Boise, Pasco and Spokane, carrying volumes of ~84,000 bpd during 2011. The terminals have total storage of 1.3 MMbbl and delivered ~51,000 bpd in 2011. Tesoro said the system in combination with its existing terminal assets in the region will lower overall costs and

increase third-party revenue.As part of the deal—expected to

close in 1Q13—Tesoro also acquired a five-mile jet fuel pipeline to Salt Lake City International Airport.

Tesoro upsized its $300 million revolving credit facility to $500 million to support the transaction and future growth opportunities. The new assets are expected to generate annual EBITDA of ~$33 million in the one-year period following closing.

760-mile pipeline from Salt Lake City to Spokane carries ~84,000 bpd.

Tesoro’s new terminal assets from the deal have 1.3 MMbbl total capacity.

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latest asset News ` Deals totaling $4.6 billion take

out Chesapeake midstream

` Carlyle buys 47.5% interest in NGP Energy Capital

` Continental closes Bakken buy and Eastern asset sale

` Sheridan buys SandRidge’s Permian assets for $2.6 billion

` Statoil buys Marcellus operated acreage for $590 million

` Cabot sells conventional properties in South Texas

` NFR adds Mid-Con & Eagle Ford liquids for $736 million

` Gulfport Energy pays $372 million for Utica acreage

` Multi-Corp buys New Mexico oil asset for $12 million

` Norse offers Marcellus & Utica acreage in New York

` Oil States expands completion offerings with Tempress buy

` Freepoint Resources buys Pinedale stakes for $61 million

` Privately held Talos buys Helix’s GOM assets for $610 million

` ZaZa marketing Eagle Ford assets with upside

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Volume 05, No. 12 11 iNfrastructure

Inergy Midstream upsizes Rangeland debt offering 25% Inergy Midstream and sub NRGM Finance priced a private debt offering of

$500 million in 6.0% senior unsecured notes due 2020 at par. The offering was upsized 25% from a previously anticipated $400 million. Proceeds will be used to fund part of Inergy’s pending $425 million purchase of Rangeland Energy, with the remainder funded by proceeds from a 10.7 million-

unit private offering.Debt offer proceeds will

also repay existing borrowings under its $600 million revolver. Outstanding debt under the revolver as of Q3 was $416.5 million, with another $2.0 million in letters of credit.

Meanwhile, Inergy closed its acquisition of the Colt hub in the North Dakota Bakken from Rangeland. The system provides a 150,000 bopd rail-loading terminal in Williams Co. and 21 miles of bidirectional pipeline connecting the Colt hub to the Enbridge and Tesoro pipelines.

•Billionaire Carl Icahn increased his stake in Chesapeake Energy to 9.0%, up from a 7.6% position this summer. SEC filings show Icahn spent ~$951 million to build the 9.6 million-share position. Icahn and Chesapeake’s other largest shareholder Southeastern Asset Management (with 13.5%) recently selected four board seats at the company. Icahn also has a $2.8 billion stake in CVR Energy. Some analysts including those at Baird and Oppenheimer are interpreting the position increase as a sign of Icahn’s growing confidence in the company’s direction.

•Holly Energy Partners is undertaking a 2-for-1 split of common units, effective January 16 for holders of record as of January 7. CEO Matt Clifton said the move should make units more accessible to investors and enhance trading liquidity. Clifton also noted that since the partnership’s 2004 IPO, it had returned over $67/unit to owners through $43/unit appreciation and over $24/unit in distributions.

Midstream Capital Briefs

PVR option exercised, raising $166 million in offeringPVR Partners closed its 7.47 million-unit public offering priced at $23.11/unit,

raising a net $165.7 million. The sale included full exercise of a 975,000-unit over-allotment option, pushing proceeds up 15%. Proceeds are being used to repay a portion of outstanding borrowings under PVR’s revolver on which the company owed $535 million as of Q3 bearing a YTD 2012 average 3.3% interest.

With 88.4 million units as of Q3, the offer amounts to an 8.5% dilution to equity holders, compared to the 3.7% price discount to the prior day’s unit price close and only a 2.0% drop in unit price the day following news of the offer.

Joint bookrunning managers were Wells Fargo, BofA Merrill Lynch, Barclays, Citigroup, JP Morgan, RBC and UBS. BB&T was a co-manager.

Inergy closes on 150,000 bopd capacity rail-loading terminal.

DCP Midstream drops down part of Eagle Ford systemDCP Midstream formed a JV with DCP Midstream Partners and completed

a drop-down of one-third interest in its Eagle Ford system for $38.3 million. DCP Midstream is the general partner of DCP Midstream Partners and is a 50:50 JV between Spectra Energy and Phillips 66.

Meanwhile, DCP Midstream Partners sub

DCP Midstream Operating LP sold $500 million in 2.5% senior notes due 2017 at 99.379% of par, most of the proceeds of which will be used to repay the loan while $140 million will go to GP purposes. In addition, the loan partially funded the partnership's one-third interest in Eagle Ford dropdowns and the cash portion of investment in its 20% minority ownership of the Mont Belvieu 1 fractionator operated by Oneok (80% WI).

DCP Midstream Partners reported $1.04 billion in long-term debt as of Q3. Standard & Poor’s assigned a BBB- rating to the new notes. Joint book-running managers were JP Morgan, RBS, SunTrust, Barclays, Deutsche Bank, RBC and US Bancorp.

DCP subsidiary sells $500 million in public debt due in 2017 to repay loan.

top Five Midstream transactions since december 7Date Buyer Seller Value ($MM) Type12/12/12 Williams Chesapeake $2,400 Pipeline12/12/12 Access Chesapeake $2,100 Pipeline12/20/12 Atlas Cardinal $603 Processing12/12/12 Tersoro Chevron $400 Pipeline12/10/12 CorEnergy Ultra $205 Gathering

Note: Excludes downstream/refining deals. Source: Global M&A Database plsx.com/ma

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latest Finance News ` Chevron selling $4.0 billion in

notes for debt refinance

` Nabors combines facilities to single $1.5 billion revolver

` Targa finances $950MM Bakken buy with equity & revolver

` Apache sells $2.0 billion in public debt

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MidstreaMNews 12 December 28, 2012

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•Australia’s Beach Energy began transporting oil along its Western Flank pipelines which are connected to facilities in Moomba, South Australia. The 7,000 bopd Callawonga-to-Tantanna line is expected to be at full capacity in 1Q13, while the 8,000 bopd Growler-to-Lycium line is already at capacity. The 16,000 bopd Lycium-to-Moomba trunkline was connected in late November, and Beach has begun building a 10,000 bopd Bauer-to-Lycium flowline expected online in 2Q13.

•BP Biofuels will invest $350 million to increase ethanol production at one of its Brazilian sugarcane processing plant in Edeia, Goias State. The expansion of the Tropical fractionators will begin in 2013 and double processing capacity to ~43.56 Mcfd of ethanol equivalent by 1Q15.

International

PetroChina pays $1.6 billion for stake in LNG projectState-owned PetroChina paid BHP Billiton $1.6 billion for a 10% stake in the

Browse LNG project off the western coast of Australia. BHP described the sale of 8.3% of the East Browse and 20% of the smaller West Browse projects as having

“exited a non-strategic asset.” BHP has disposed of

several assets over the past six months in cost-cutting efforts including the Ekati diamond mine 120 miles south of the Arctic Circle in Canada’s Northwest Territories. In addition to PetroChina, JV partners in Browse are Woodside Petroleum, Royal Dutch Shell, BP and a Japanese consortium that includes Mitsui and Mitsubishi.

Analyst group Bernstein Research said in a note that even though the project has been “stranded” for 20 years now, the involvement of PetroChina and the Japanese consortium makes “development now likely” though at least five years away.

Socar’s $6.6 billion refinery advances with Turkish incentivesAzerbaijani NOC Socar’s $6.6 billion investment in the Star refinery in Turkey’s

western province of İzmir will go forward with Turkish government incentives comprised of value-added and customs tax exemptions, a 90% tax cut and a 50% investment contribution, a statement made to the Istanbul stock exchange said. The government will also return VAT for the construction works and support Socar in insurance premium

and interest payments. Socar Turkey president

Kenan Yavuz said that the incentives, Fitch’s upgrade of Turkey’s rating to “investment level” and the use of 35% equity capital significantly lowers the financing costs of the project.

The 214,000 bpd facility will contain units for crude and vacuum distillation, naphtha hyrdrotreating, delayed coking with a capacity of a 40,000 bbl per stream day

(24-hour period of operations) 66,000-bbl per stream day of hydrocracking, and LPG caustic treatment.

The Star refinery will be installed on the site of leading Turkish petrochem and 61% Socar sub Petkim’s main plant complex and will meet Petkim’s feedstock requirements for LPG, naphtha and xylenes as well as supplying diesel and jet fuel to the import-dependent domestic market.

Huge inroad: LNG supertanker crosses less-icy ArcticA 100,000-ton Gazprom-chartered LNG tanker became the first-ever supertanker

to cross the Arctic, pointing to how much climate change may eventually affect shipping routes throughout the industry.

The 144-by-945-ft Norwegian ship Ob River began crossing

more than 6,000 miles of icy Russian seas on November 7 from Sasol’s Snoehvit LNG facility in Norway. It arrived at the Japanese port of Tobata on December 5.

Arctic routes can cut transit times by 40% vs. the Suez Canal, said Tony Lauritzen of Greek shipping firm Dynagas which owns the Ob River in a Financial Times article.

“The northern route dates back hundreds of years, but it was never open for long,” he said. “Only in the last five years or so

have you seen voyages along the route by big international shipping companies.”Continued melting would open up access for LNG shipments to Asia where they

would bring higher prices than in Europe.

Star project on track for signing of EPC contract by year’s end.

Socar cites Fitch upgrade of Turkey’s investment level as enticement.

Cost-cutting BHP Billiton exits Western Australia’s Browse effort.

Arctic routes can cut transit time by 40% vs. travel via Suez Canal.

Gazprom would be main beneficiary of regular use of Arctic routes.

People Briefs •BG Group announced the departure

of CEO Frank Chapman, citing health reasons. Chris Finlayson, managing director of BG Advance, has been appointed to replace him, effective January 1, 2013.

•Dominion has appointed Scott C. Miller, VP, budgeting, business planning & market analysis as VP of Dominion East Ohio.

•Effective Dec 31, Kirby announced the retirement of C. Berdon Lawrence from its board. William M. Waterman, former president of Penn Maritime, has been appointed to the board.

•Meritage Midstream has promoted Nick Thomas from VP, business development, to president.

•Oneok and Oneok Partners announced the following effective January 1: EVP and COO Pierce H. Norton II has been appointed as EVP, commercial. EVP, CFO and treasurer Robert F. Martinovich has been appointed as EVP, operations. SVP and CAO Derek S. Reiners has been appointed as SVP, CFO and treasurer. VP and controller Sheppard F. Miers III has been appointed as VP and CAO.

•Sempra Energy appointed James H. Lambright as SVP, corporate development. He joins from Sapphire Energy where he served as COO, CFO and on the board.

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Volume 05, No. 12 13 iNfrastructureCanada

Canada green-light’s Petronas LNG-linked deal

Canada gave the go-ahead for Malaysian state-owned Petronas’s $6.0 billion purchase of Progress Energy. The acquisition gives Petronas gas reserves to supply a $9-11 billion LNG export facility along the British Columbia coast.

Petronas plans to go forward with the Lelu Island export facility within the Port Edward district while developing gas production in the Montney region of northern B.C. and Alberta. The company will later install transmission pipeline from production fields to the Canadian LNG facility. Current plans call for two liquefaction plants and the capability of adding a third plant. The LNG

throughput is designed for 3.8 mpta per plant.

The two companies recently announced the LNG project was moving into the pre-FEED phase with completion targeted for 2019. A final investment decision for the project continues to be expected in late 2014, followed by the first LNG exports in 2018.

“This approval by the Canadian government marks an important step in our plans to develop a liquefied natural gas export business,” said Progress CEO Michael Culbert. The companies expect that the construction phase will result in 3,500 direct jobs and operations of the facility will result in 200-300 direct jobs.

Originally the deal was rejected by the Canadian government but after making what Industry Minister Christian Paradis called “significant commitments” to affected areas, the proposal was approved as beneficial to the country.

The project will compete with Shell-operated LNG Canada, Chevron-operated Kitimat LNG, the BC LNG Co-Operative and potentially a BG Group facility that awaits a final investment decision.

Pre-FEED phase is underway with 2019 completion in mind.

Current Lelu Island plans allow for LNG throughput of 3.8 mtpa per plant.

Court allows Shell’s Jackpine oil sands project to expandShell Canada’s plans to expand the Jackpine oil sands facility north of Fort

McMurray got the go-ahead from an Alberta court which rejected petitions by First Nations groups to halt the project. Shell and its partners plan to boost capacity at the project ~39% to 355,000 bopd of synthetic crude. The application was originally submitted in 2007. The current Jackpine Mine is operated by Shell on behalf of Athabasca Oil Sands Project owners Shell (60% WI), Chevron (20% WI) and Marathon Oil

Canada (20% WI).The Athabasca Chipewyan

First Nation and the Métis Nation of Alberta’s Region 1 had argued that their constitutional rights were being abrogated in the review process and that their treaty rights to the land would be infringed upon if the expansion were allowed to proceed. The expansion project would damage 30,000 acres of their traditional territory, they said, and Shell’s plan to redirect a section of the Muskeg River to mine the bitumen underneath the riverbed would hurt fishing. The groups are looking at taking their case to the Supreme Court of Canada.

Shell said it has consulted with the Athabasca Chipewyan First Nation more than 600 times over the past six years about the project. Other First Nation communities in the vicinity are not opposed to the expansion, the company said. A regulatory decision is expected within the next few months.

Gibson concentrates spending on terminals & pipelinesGibson Energy’s terminals and pipelines will account for ~45% of the company’s

$304 million capital spending in 2013. The money primarily will go toward construction of large storage tanks at the Hardisty, Alberta terminal, backstopped by long-term contracts and unit train rail opportunities. The company also plans to add more feeder pipelines to the Edmonton terminal. Of $134 million in terminal and pipeline spending, ~$122 million involves projects set to come online between

early- and mid-2014.With Gibson looking to

increase its presence in North American oil plays, CEO Stewart Hanlon said the terminals and pipelines initiative should “enable our integrated oil-levered assets to provide diversified cash flow and stability.” Hanlon expects the company’s 2014 capital spending to exceed $200 million with 60-65% allocated to the terminals and pipelines segment.

Shell said it talked with the Athabasca community more than 600 times.

Hardisty & Edmonton terminals are the focal points of new infrastructure.

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MidstreaMNews 14 December 28, 2012

•Gazprom’s renewed talks on delivering gas to China via an eastern pipeline route have moved “to a practical level,” CEO Alexei Miller said in a company statement. When talks

fizzled out in 2011 over pricing, Gazprom had hoped to sell ~2.4 Tcf of gas to China from new fields

in eastern Siberia, along with fields in western Siberia already used to supply European customers. , This will put China in competition with Europe for those supplies.

•The Iranian oil ministry will build a refinery near the Caspian Sea to process oil from Sardar Jangal field located in the Caspian Sea, according to Iranian E&P company Khazar Oil. The field is estimated to have 2.0 Bbbl in place of which ~500 MMbbl is recoverable. The crude has a density of 41°API.

•Austrian energy group OMV confirmed it is in talks to buy German producer RWE Dea’s 16.7% stake in the ~$12 billion Nabucco gas pipeline project, which would raise OMV’s interest to 33.4%. Other stakeholders in the project to carry Caspian gas to Europe are operator FGSZ (a sub of Hungary’s MOL Group), Turkey’s Botas, Bulgaria’s BEH and Romania’s Transgaz. The pipe—originally to run 2,485 miles—now is expected to run ~808 miles from the Turkish border with Austria.

•State-run Angolan oil company Sonangol began work on the planned 100,000 bopd Lobito oil refinery in what the company sees as the beginning of the long process of eliminating the nation’s importation of fuel and lubricants. The $8.0 billion plant will be ~3.8 miles from the city of Lobito and supply Angola and nearby countries with oil derivatives. It will produce unleaded gasoline, diesel, jet fuel kerosene, LPG and sulphur from Angolan oil.

•Turkish security forces closed down a small refining operation and an illegal pipeline used to smuggle oil from Iran into the county. The Turks found the ~1.9-mile pipeline and a ~157 bbl storage facility while battling with Kurdish guerrillas.

International Briefs

Chesapeake (CHK; $17.25–Dec. 17; Neutral; PT: $17.27)The company reached a definitive agreement with Access Midstream Partners

(previously Chesapeake Midstream Partners CHKM) to sell the majority of remaining CMD assets for $2.16 Billion. When all is said and done, Chesapeake should cash in total proceeds from the midstream business of $4.875 billion. According to our understanding, GIP, Access’ sponsor, had originally planned to take the assets in house and drop them down over time, but this deal houses the newly acquired assets at the partnership level instead. The included areas of operations include Eagle Ford, Utica, Marcellus, Haynesville, and Power River Basin. Access estimates $250275 million of EBITDA from the assets in 2013 and $400450 million in 2014. 2013 purchase price multiple of approximately 8.0x is a little below recent midstream transaction multiples, but growth capex planned for these assets is formidable at approximately $2.0+ billion over the next couple of years. Following the deal, 7580% of Access business will be related to CHK and all of the contracts from the acquisition are fixed-price fee-based agreements…major takeaway here, in our view, is that a deal on the biggest remaining piece will be done by yearend and total proceeds were on target with previously announced estimates. As recently as last week, we had heard that the largest remaining portion of the deal could be pushed into early 2013, and we continued to hear from some clients that the deal with GIP could fall through. Given that sentiment, we would expect a positive reaction to the news. —David Tameron, Wells Fargo

Tesoro Logistics (TLLP; $41.75–Dec. 19; Neutral; PT: $42.07) TLLP [Tesoro Logistics] acquires UT-to-WA products system from CVX [Chevron]

for $400mm. 1st third-party acquisition for TLLP at 12.1x EBITDA vs. dropdowns from TSO at 9.5x (WA rail, CA dock facilities). 2nd pricey liquids pipe deal of the day along with SE’s 11.5x purchase of Express-Platte, deal still accretive due to low cost of capital. Midstream M&A increasing pace before 12/31 due to tax concerns, liquids asset sellers have been prime beneficiaries. Other deals likely tax-related, but CVX just hitting attractive bid here. —Jeff Tillery, Tudor, Pickering, Holt & Co.

Ultra Petroleum (UPL; $20.08–Dec. 17; Neutral; PT: $20.38) Ultra Petroleum announced a purchase and sale agreement for its Pinedale

liquids gathering assets for $225MM in pre-tax cash proceeds. The transaction is expected to close later this month yielding $210-215MM after tax. Proceeds will be used to repay debt ($600MM is currently drawn on $1B revolver). The Street largely anticipated the transaction but the announcement is still positive as it removes the overhang. In our view, the transaction makes sense from that standpoint that the proceeds give the company optionality and shore up liquidity in a challenging gas macro environment (our projected 2012/2013 outspend moves from -$26MM to $197MM). We had previously incorporated $200MM of debt reduction into our model (EPS impact is $0.08), but with a $20MM rent expense reducing our 2013 EPS by $0.13/share, we are lowering 2013 estimate to $1.36 from $1.49. We are revising our valuation range to $21-25 from $23-27… Ultra Petroleum has a core position in the highly prolific Pinedale/Jonah field and a large acreage position in the Marcellus…We believe that high gas exposure and capital outspend coupled with uncertainty from the non-operated Marcellusprogram will drive shares to perform in line with peers. —David Tameron, Wells Fargo

What the Analysts are Saying About Midstream & Downstream

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Volume 05, No. 12 15 iNfrastructure

easterN & aPPalaCHIaWESTERN PA PIPELINE CORRIDOR~85 Miles Owned In Fee Simple.VENANGO, BUTLER, CLARION& JEFFERSON CO., PENNSYLVANIA G Right-Of-Way Allows for Multiple Pipes.Ready For New Pipe Construction.CONTIGUOUS OFFERING PIPELINEAbandoned Railway, Cleared & Graded.Title Verification Underway.CONTACT SELLER FOR DETAILSG 1838

WEST VIRGINIA ACREAGE~18,170-Gross/Net Acres.MARCELLUS SHALEGREENBRIER, NICHOLAS, WEBSTER LLongTerm Resource Potential: Expanding-- South Window Of Marcellus PlayAcreage Close To Major Market Pipelines.277-Potential Locations. 80-Acre Spac.100% OPERATED WI; >87% NRI(Lease)Active Leasing, Well Permitting & -- ACREAGE-- Drilling By Others In Area.EUR: 2.8 BCF/Per WellNO DRILLING COMMITMENTSReasonable Capital Costs As Drill ---- Depths Are 6,000-8,000 Ft.CONTACT AGENT FOR UPDATEL 1543DV

roCKIesRIO BLANCO CO., CO LEASES+/- 20,000-Gross/Net Acres.BUCKSKIN MESA FIELDFEDERAL EXPLORATORY UNIT DVObj 1: Mancos ‘’B’’ 12,500 Ft.Obj 2: Mesa Verde. 8,000 Ft.Niobrara, Frontier & Leadville Potential3-D Seismic + Subsurface Geology Data100% OPERATED WI; +/- 80% NRINo Pugh Clause or Depth Limitation MANCOSMultiple Well Drilling Pads AvailableEstimated Project Reserves: >1.0 TCFNon-Utilized Pipeline Right-of-WaysDedicated 10-Acres to Compression----& Treatment Facilities.CONTACT SELLER FOR DETAILSDV 8915GW

WELD CO., CO PACKAGE 43-Wells; 11,910-Net Acres. 87% HBPDENVER JULESBERG BASINNIOBRARA, CODELL & DJ SANDS PP100% OPERATED WI; 80% NRINet Production ~360 BOEDMAJOR OFFSET ACTIVITY NIOBRARAGas Gathering System Available.Yard & Oilfield Equipment/Supplies----Located In New Raymer, COCONTACT PLS FOR MORE INFOPP 8599DV

MIdCoNtINeNtKAY CO., OK PROSPECT2-ShutIn Gas Wells. 14-Pot. 160-Acres.CHAUTAUQUA PLATFORMObj 1: Kisner Sandstone. 580-600’. DVObj 2: Mississippian Chat/Lime. 3,780’.Other Objectives: Bartlesville, Redford,Skinner & Cleveland.Offset Data Available.100% OPERATED WI; 80% NRI MISSISSIPPIANExpected IP: 10-20 MCFD Shallow &10-50 BOPD In Deeper Mississippian.Well Reserves: 100 MMCF & 400 MBO1 Mile Gas Pipeline & Tap In Place.Cost Below For Shallow Wells.DHC: $10,000; Compl: $30,000CONTACT SELLER FOR DETAILSDV 1493

NORTH OKLAHOMA PACKAGE85-Wells. ~14,346-Net Acres.BEAVER, ELLIS & HARPER CO.MOCANE-LAVERNE AREA PPChester, Morrow, Tonkawa, Chase-- & Council Grove Production.Various Depth Limitations & RestrictionsAvg 59% OPERATED WI; 48.3% NRI 2,800Gross Prod: 2,800 MCFD & 11 BOPD MCFDNet Sales: 1,200 MCFD & 3.0 BOPDNet Operating Cash Flow: $68,900/MonthSale Includes Gas Gathering LinesCA Required to View Data RoomCONTACT AGENT FOR UPDATEPP 5999DV

easterN & aPPalaCHIaNEW YORK ACREAGELeases. 133,000-Total Net Acres.BROOME, CHANANGO & MADISONMARCELLUS & UTICA SHALE LOn Trend w/ Established ProductionUpside in the Geneseo & Devonian Shales500 Miles of Proprietary 2-D Seismic70-Square Miles Proprietary 3-D Seismic.100% OPERATED WI; 81.25% NRI MARCELLUSEXPLORATION & PIPELINE RIGHTS UTICA150 Mile Multi-Line ROW to Connect ---- Three Major Interstate Pipelines.CA Required to View Data RoomCONTACT AGENT FOR UPDATEL 7489G

PENNSYLVANIA PRODUCTION SALE690-Total Acres. 2-Properties.FAYETTE & WESTMORELAND CO.APPALACHIAN BASIN PPAll Mines and MineralsUp to 50% Interest in Marcellus; 83% NRIAvg. Wells Producing 15 MMCFD 15Major Gas Pipelines Run thru Properties MMCFDCONTACT SELLER FOR DETAILSPP 7585M

arK-la-teXEAST TEXAS PIPELINE RIGHT-OF-WAY65-Mile Corridor. +/- 20,750 RODS.ANGELINA, NACOGDOCHES, RUSK --- & SHELBY COUNTIESExposure to Cotton Valley Development GContiguous, Valid Right-of-Way Opportunity.Liquids Rich AreaROW Allows for Multiple Pipes R-O-WOffset Operators: Anadarko, EP Energy ---- BHP Billiton & EncanaReady For New Pipe ConstructionCONTACT PLS FOR ADDITIONAL INFOG 1964PL

GulF CoastSOUTH LOUISIANA PROSPECT4-Initial Wells.GULF COAST100% OPERATED WI; 75% NRI DV-- NonOperated WI Also AvailablePipelines in Place & Tap Hooked Up GULFWell Reserves: 14 BCF & 216 MBO/Well COASTProspect Reserves: >75 BCFDHC: $1,500,000; Compl:$1,300,000CONTACT SELLER FOR MORE INFODV 1827

PerMIaNPERMIAN BASIN PROPERTY7-Active. 1,960-Gross Acres On Trend.REEVES COUNTY, TEXASMULITPLE LEASES PPAtoka, Wolfcamp, Delaware 4430, Cherry-- Canyon & Bone Springs Production4.5 Mile Gathering System with ---- Capacity to 15.0 MMCFD96-100% OPERATED WI; 72-83% NRI SHORTGross Prod: 13 BOPD & 509 MCFD FUSEActive Horizontal & Vertical Offset DrillingAvg Net Income: $14,253/MonthAGENT WANTS OFFERS DEC 2012PP 1798DV

BORDEN CO., TX ACREAGE80-Acres.PERMIAN BASINALL DEPTH RIGHTS DVGood Wellbore with Casing96% OPERATED WI; 75% NRIEquipment Included w/ Package Sale PERMIANPrimary Term Thru May 5, 2014CONTACT MIDLAND AGENTDV 1967G

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