Vaquero(Midstream(–Permian(DUG(2016( · 9 Average(ProducLon(Comparison:(Southern(Delaware(Basin(Year* Permits Gas MMCFD* Oil* MBbl/d 2012 3,043 850 120 2013 3,133 930 155 2014 3,868

Vaquero Midstream – Permian DUG 2016 Capturing Economic Value of Mexico’s Natural Gas

Demand Through Midstream Reliability

Midstream Spotlight – May 23, 2016

3

Reliability: Realigning Around Value

If This PresentaLon Had a Facebook Page

Economic Up8ck – Mexico Demand

Poli8cal and Regulatory Unknown

Infrastructure Challenge

Vaquero: A Basin Midstream Solu8on

4

Mexico Demonstrates Natural Gas Demand

MAKE CLEARER

Agua Dulce

2-‐7 BCFD Waha

Mexico’s Demand From the Waha Hub: A Deliberate Choice

Presidio 1.4 BCFD

San Elizario 1.7 BCFD

California 1.2 BCFD

Midwest 1 BCFD

Metroplex 0.5 BCFD

Gulf Coast 1.5 BCFD

Katy -‐ LNG >0.5 BCFD ?

ExisLng Demand New Demand

5

WAHA

Comanche Trail Pipeline

Roadrunner Pipeline *

Trans Pecos Pipeline

3+ BCFD Capacity

*Already flowing 100 MMSCFD+ today

6

Previous Economic Status But …..

7

The Unknowns: Regulatory and PoliLcal

§  Railroad Commission, EPA and other regulatory influences §  PoliLcal ElecLon to govern our country

?

8

§  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’)

Good News In Southern Delaware

Source: Wood Mackenzie

9

Average ProducLon Comparison: Southern Delaware Basin

Year Permits Gas MMCFD

Oil MBbl/d

2012 3,043 850 120

2013 3,133 930 155

2014 3,868 1,200 235

2015 2,772 1,500 325

SOURCE: Drilling Info

SOURCE: Drilling Info

0 200 400 600 800

1,000 1,200 1,400 1,600 1,800

2012 2013 2014 2015

MMCFD

Rich Gas Produc8on

10

CreaLng a Challenge for Midstream Infrastructure

TOTAL PRODUCTION VOLUMES

Technology Advances & Applied Science

Price Points UP

DUCs

11

More Crude Trucks on the Road Again!!!

12

Southern Delaware Basin Gas Infrastructure Today

§  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

Infrastructure Challenges: Midstream Hurdles to Overcome

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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

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.

Vaquero Culture

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!

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  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)

Vaquero’s Answer: Phase I Complete

17

Ini$al System In-‐Service

Midstream Challenge Accepted: Vaquero Rich Gas Gathering System

18

Midstream Challenge Accepted: Vaquero Caymus Cryo Plant I

800 MMSCFD Large Capacity Gathering Pipeline

*solving volume & hydraulic

issues

Two (2) or more NGL Outlets:

Reliable Service Mul8ple Residue Gas Outlets at

Waha Market Hub:

Atmos

OneOk WTX

Enterprise NTX

NNG

Lone Star NGL Pipeline

Chaparral NGL Pipeline Mexico

19

20

Vaquero Caymus Facility Phase I

Residue Gas Check Meter

Pistolero NGL Check Meter

Slug Catcher

Condensate Storage

Condensate Loading

Condensate Stabiliza8on

Inlet Compression

200 MMSCFD Cryogenic Unit w/

Propane Refrigera8on Dual Drive

Residue Compression

Electrical Substa8on

Bulk Trea8ng & Dehydra8on

30” Lariat Inlet Gas Pipeline

21

Vaquero Caymus Facility Phase I: Inlet Liquids Handling 5k BPD




Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression



22

Vaquero Caymus Facility Phase I: Inlet Compression



Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression




23

Vaquero Caymus Facility Phase I: Bulk TreaLng & DehydraLon



Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression




24

Vaquero Caymus Facility Phase I: 200 MMSCFD Cryo Unit



Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression




25

Vaquero Caymus Facility Phase I: Dual Drive Residue Compression



Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression




26

Vaquero Caymus Facility Phase I: On Site SubstaLon



Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression




27

Vaquero Caymus Facility Phase I: Product Delivery



Slug Catcher

Condensate Storage

Condensate Loading


Inlet Compression



Residue Compression




28

Vaquero Caymus Facility Site -‐ Scalable to 800 MMSCFD

29

What Does RunLme Mean to the Producer?

System Run8me Flaring Gas

Down Time

Hours per Month

Lost Value to Netback

Wellhead Netback $2.50/MCF

99% 1% 7 $0.025 95% 5% 36 $0.125 90% 10% 73 $0.250 85% 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.

30

Reliability -‐ Realignment Around Value

If This PresentaLon had a Facebook Page

Economic Up8ck – Mexico Demand

Poli8cal and Regulatory Unknown

Infrastructure Challenge

Vaquero -‐ A Basin Midstream Solu8on

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

Status Update: Southern Delaware Basin Page

ExecuLve Management Team

Gary E. Conway Principal, President

and CEO

William W. Davis Principal

32

Bryant H. Pahon Principal

Brian W. Best ExecuLve Vice President, Business Development

Business Development Team

Brian Hieh Business

Development

Breh Taylor Manager of Gas

Supply

33

Jus8n Benneh Business

Development

Christopher Seiders Vice President,

Corporate Development

Documents

Vaquero(Midstream(–Permian(DUG(2016( · 9 Average(ProducLon(Comparison:(Southern(Delaware(Basin(Year* Permits Gas MMCFD* Oil* MBbl/d 2012 3,043 850 120 2013 3,133 930 155 2014 3,868