AAPL Texas Land Institute
September 11, 2012
Houston, TX
Josh Weber
Senior Vice President, Commercial and Business Development
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Forward-Looking Statement
Statements contained in this presentation that include
company expectations or predictions should be
considered forward-looking statements.
It is important to note that the actual results of
company earnings could differ materially from those
projected in such forward-looking statements.
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Agenda
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Howard Energy Partners overview
Location and timing of capacity additions
Selecting optimal plant locations
Efficiencies and economics of gas processing
Reducing lead time to plant in-service
Potential royalty considerations
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Howard Energy Partners Overview
 Howard Midstream Energy Partners, LLC (“HEP”) is a private midstream company with operations
primarily focused in the Eagle Ford Shale
 Founders
 Mike Howard (Former President of Midstream for Energy Transfer Partners)
 Brad Bynum (Former CFO of Hall-Houston Exploration Partners)
 Company Strategy
 Customer driven, asset oriented solutions to gathering and processing needs (engineering,
construction, ownership and operations)
 Organic growth projects supplemented with strategic acquisitions
 Top-tier management and technical capabilities
 Long-term focus
 Assets
 Started operations June 2011 concurrent with the acquisition of two private companies
- Texas Pipeline (250 miles of rich gathering pipeline)
- Bottom Line Services (midstream energy services)
 Constructed 30 mile rich header in Dimmit County and put into service October 2011
 Completed acquisition of Meritage Midstream’s Eagle Ford and Cuervo Creek gathering
systems in April 2012 (170 miles of rich and lean gathering pipeline)
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Howard Energy Partners Asset Map
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Existing Natural Gas Processing Capacity
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Where Will New Infrastructure Be Available?
(New and Planned Processing Plants in Bold)
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How have plants developed relative to production?
Eagle Ford benefits by having existing infrastructure
2008
2009
2010
2011
2012
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How have plants developed relative to production?
Activity ramps up during 2010 and capacity additions planned
2008
2009
2010
2011
2012
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How have plants developed relative to production?
Significant expansion occurs in 2012 and beyond
2008
2009
2010
2011
2012
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Selecting optimal plant locations
Proximity to:
- Producing Area or P/L Infrastructure
- Liquids takeaway (P/L, Trucking, Injection Stations)
- Gas Residue P/L Infrastructure
Expansion of existing plants should be explored
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How much total capacity is being added?
New and Planned Processing Plants
Plant Name
Announced
Capacity (MMcf/d)
300
Estimated Startup Owner/Operator
Yoakum Plant Phase 2
2012
Enterprise
Chisholm Plant
2012
ETC
120
Woodsboro Plant
2012
Southcross Energy
200
Silver Oak Plant
2012
Teak Midstream
200
Reveille Plant
2013
HEP
200
Houston Central Phase 2
2013
Copano Field Services LLC
400
Karnes County Plant
2013
ETC
200
Eagle Plant
2013
DCP Midstream
200
Flag City Plant
2013
Boardwalk Field Services
150
Jackson County Phase 1
2013
ETC
600
Yoakum Plant Phase 3
2013
Enterprise
300
Brasada Plant
2013
Western Gas Partners
200
Houston Central Phase 3
2014
Copano Field Services LLC
400
Jackson County Phase 2
2014
ETC
200
Jackson County Phase 3
2014
ETC
200
TOTAL
3,870
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Historical Conventional South Texas Gas Analysis
Lower GPM
 Prior to the Eagle Ford,
most conventional S.
Texas gas had fewer
NGLs per cubic foot
 Plants already in place
were designed to
handle gas in the 2-4
GPM range
 Richer gas was small
volumes associated
with oil wells
0.18
5%
0.28
7%
0.34
9%
Ethane (C2)
1.75
48%
Propane (C3)
n-Butane (nC4)
IsoButane (iC4)
1.14
31%
Natural Gasoline (C5+)
Total GPM – 3.68
1173 Btu/CF
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Older plant technologies still add value
Although not as much attributed to ethane
 Assumed
component
recoveries
 50% C2
 95% C3
 95% C4+
$6.00
$4.00
$0.31
$1.75/Mcf*
$3.17/Mcf
 Estimated fuel usage
of 3.25%
$3.00
 Nymex price of
$2.75/MMBtu with
a ($0.05) basis
differential
$2.00
 Current OPIS NGL
pricing for August
$4.91/Mcf
$5.00
Ethane (C2)
$0.90
Propane (C3)
$0.26
$0.45
$0.53
IsoButane (iC4)
n-Butane (nC4)
Natural Gasoline (C5+)
$2.46
$1.00
Natural Gas
$0.00
Unprocessed Value
Processed Value
* Margin does not include processing, transportation, or fractionation fees
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Shift in NGL Barrel Composition
“Typical” Barrel has become lighter over the past decade
 Enhanced ethane
recoveries most
significant contributor to
lighter barrel
 Shale gas tends to
contain higher ethane
percentages
 Lighter products (ethane
and propane) are not as
linked to crude prices
and exhibit greater
volatility
 Ethane dependent on
petrochemical demand
and rejection capabilities
can be limited
Source: Tudor Pickering Holt , EIA
16%
11%
7%
29%
13%
9%
7%
28%
Natural Gasoline
IsoButane
n-Butane
Propane
37%
43%
2002
2012
Ethane
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Typical Eagle Ford Gas Analysis
Higher GPM, Increased Ethane Contribution
 Eagle Ford wet gas is
richer than historical
S. Texas gas
 However, an
increased portion of
the gas stream is
derived from ethane
0.39
7%
0.20
4%
0.53
9%
Ethane (C2)
Propane (C3)
1.28
23%
3.14
57%
n-Butane (nC4)
IsoButane (iC4)
Natural Gasoline (C5+)
 GPM for Eagle Ford
gas ranges from 5.0
to 7.0
Total GPM – 5.54
1251 Btu/CF
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Processing creates significant value
Especially when utilizing efficient cryogenic processing
 Assumed
component
recoveries
$7.00
$6.30/Mcf
$6.00
$1.01
 90% C2
 98% C3
 100% C4+
 Estimated fuel usage
of 1.75%
 Nymex price of
$2.75/MMBtu with
a ($0.05) basis
differential
 Current OPIS NGL
pricing for August
$5.00
Ethane (C2)
$2.92/Mcf*
$4.00
$3.38/Mcf
$3.00
$1.13
$0.32
$0.55
$1.08
Propane (C3)
IsoButane (iC4)
n-Butane (nC4)
Natural Gasoline (C5+)
$2.00
Natural Gas
$2.20
$1.00
$0.00
Unprocessed Value
Processed Value
* Margin does not include processing, transportation, or fractionation fees
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How can I develop capacity faster?
• Streamline the in-house process
• Pay vendors for expedited equipment deliveries
– Can be costly
• Consider using rental compression vs. purchased
• Find ways to develop project in phases
• Limit equipment specifications
– Stay as close as possible to base packages
• Offer performance bonuses for early delivery
• Fabricate in the shop as opposed to the field
• Take some risk and obtain a plant and compression early!
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Or, look for existing capacity on the market
And we happen to know where to find some of it…
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200 MMcfd
cryogenic
processing plant
Expected
operational date
of Sept. 2013
High ethane
recoveries (~90%)
Anchored by
producers with
lower GPM
conventional gas
Ability to accept
some quantities
of richer Eagle
Ford gas
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What are the royalty considerations?
• Point of sale can greatly affect value of royalty payments
– Sale at wellhead, plant tailgate, or further downstream
• Percent of Proceeds (POP) deals vs. fixed fee processing
• How are fees associated with processing categorized?
– Which components are potentially deductible?
• Be aware of lease clauses with minimum commodity price floors
– Both on natural gas and NGLs
– Might be triggered when processing commences
• Statements can be more complicated and greater potential for
confusion may exist
• Value of NGLs should raise overall well economics and allow
more wells to be drilled
– Creates additional value for both producer and mineral owners
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Q&A
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