New Mexico Produced Water ConferenceNovember 16, 2018

“Art of the Possible”

Reuse Opportunities in the New Mexico Delaware Basin

Solaris Water Midstream

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The “Art of the Possible”

CONFIDENTIAL

• The original phrase is "Politics is the art of the possible", which means, "It's not aboutwhat's right or what's best. It's about what you can actually get done". Gettingeverything you want is impossible, and often, you have to severely compromise inorder to get anything you want at all. But in the end, refusing to compromise meansyou get nothing whatsoever.

Quora

• We are at a point in the development of the Oil and Gas industry in New Mexico wherefacing real infrastructure challenges we have to ask ourselves what is the “Art of thePossible” ?

“Politics is the art of the possible, the attainable — the art of the next best”

Otto von Bismarck

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Delaware Basin is the “Best-of-the-Best”

1 Source: Jefferies ; 2 Source: Pioneer Natural Resources June 2015 Investor Presentation

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Source: U.S. EIA Drilling Productivity Report (November 2018)

Permian Region October Drilling Productivity Report

5Source: ExxonMobil 2018 Outlook for Energy: A View to 2040

Growth Projections for the Permian

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Can Permian Growth be Sustained?

“How can we have been drilling in the Permian Basin for 100 years and then find out it has

twice as much as we thought?” —T. Boone Pickens

Output from the Permian Basin is poised to double between 2017 and 2023 and this will require more than$300B in additional investment

Since 1923 more than 30 billion barrels of oil have been extracted from the Permian Basin. Yet accordingto IHS-Markit, it still contains much more recoverable oil as has been drilled over the last 94 years.

EIA Production data.

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New Mexico at Center of Accelerated Growth

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Produced Water Growth Challenge

Delaware Basin is expected to create nearly 2.5 billion bbl of produced and flowback water in 2018, with the majority of it going into reinjection or disposal wells. Source: Rystad Energy.

In 2017 New Mexico produced 900Mbbl of produced water

Water to Oil ratios are rising in the Delaware and average 5:1 and in some places can reach as high as 10:1

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Water Demand Challenge

• Water use in the Permian has risen six-fold since the start of the shale oil boom, from morethan 5 billion gallons in 2011 to almost 30 billion gallons in 2017

• IHS Market predicts demand will double by the end of 2018, to 60 billion gallons, and morethan triple by 2020, to almost 100 billion gallons

• Volumes pumped for completions are more than 50% higher than 2015• This is a stunning amount of water needed and there are limited options to meet this

demand:• Fresh surface water and groundwater• Brackish groundwater• Effluent• Reuse

• Climate issues, geography and regulations also play a significant role in determining options• The Energy Industry recognizes that reuse has to play an essential role in meeting the water

demand challenge and is actively looking for solutions• Technology is not the issue; technologies are available to treat produced water to drinking

water standards

Producers are looking for sustainable solutions and have to avoid bottlenecks in availability of source water, pipeline takeaway and

gathering systems, and disposal capacity

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Can New Mexico Manage Growth in Water Demand?

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The New Mexico Delaware Basin

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Challenge of Accelerated Growth: Lack of Infrastructure

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Ground Water Withdrawals are Dramatically Increasing

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Balancing Supply and Supply: Solaris’ Approach

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Water Sourcing

Water Gathering

Water Reuse

Water Disposal

• Multi-source water streams

• Reclaim, treat and reuse as much produced /

flowback water as feasible

• Reuse of existing water will reduce well LOEs and

limit environmental damage

• Continuous investment to build out both water

gathering and delivery pipe

• Water transport networks will promote the

movement and reuse of produced water

• Development of network of SWDs in connected

systems to provide redundancy and

reliability; moving to deeper zones

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Building Integrated Systems

Produced Water Trunk Line

Recycled Water Trunk Line

Fresh/Brackish Water Trunk Line

SWD #1 & Water Recycling Facility

SWD #2 & Water Recycling FacilityAnd related storage and

produced water/ recycled water ponds

SWD #3 & Water Recycling Facility

Fresh/Brackish Water Source and ponds

Operator D

Operator COperator A

Operator B

Frac Blend

Frac Blend

Frac Blend

Frac Blend

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Solaris Investment in Eddy and Lea Counties

New Mexico Delaware Basin is a key focus area for Solaris with significant acreage dedications, minimumvolume commitments, and well dedications from Operators

Currently operating and building a network of deep Devonian SWDs with multiple high-capacitypipelines to facilitate bi-directional produced water flow and recycled/blended water redelivery whilereducing trucking

Building and permitting recycling facilities, storage capacity and ponds co-located at Solaris SWDlocations, and semi fixed/mobile facilities that can be moved to support maximum optionality for reuseacross the Solaris network

Solaris can currently move 300k – 400k bwpd and is rapidly adding capacity to support Solaris’ growingdisposal capacity

The ability to aggregate large volumes of produced water across a system facilitates reuse and helpsminimize disposal and fresh water usage:

o Operator A has multiple acreage positions connected by Solaris pipeline and can take their equivalentvolumes “out” for recycling at multiple take points supplemented by third party operator producedwater aggregated on the Solaris system

o Operator B wants “raw” produced water for “frac on the fly” to support their fracs

o Operator C wants to move volumes for reuse on the Solaris system between points but if it is notfracking, volumes can be disposed

o Operator D is connecting to Solaris so they can “swap” volumes when needed for recycling rather thandispose

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Solaris Recycling Facility Midland Basin

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Overview

Project Highlights

• Location: Centered within and around Solaris’s SWD facility in the Permian Basin• Target Operator: Operator A• Start Date: November 7, 2017• Total Volume Recycled: 1,877,228 barrels (through September 10, 2018)• Total Recycle Jobs: 5 distinct recycle jobs comprising multiple wells per job• Target / Max. Rate: 20,000 / 26,382 barrels per day (on August 19, 2018)

Target Effluent Water Spec

• Iron < 10ppm• ORP > 250 • NTU < 150• pH > 6 and < 8

Influent water pooled from 25 – 50k bwpd provided by 5 operators, including Operator A, and trucks across its multi-SWD, 15-mile pipeline system in Midland County

Recycle System Location

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Successful Cost effective Results

Solaris has consistently met and exceeded its target effluent water specifications by effectively treating influent water with a wide range in quality:

Reducing influent iron counts as high as 94ppm to below 10ppm

Consistently producing crystal clear effluent water from opaque iron- and oil-rich influent water

Raising the ORP of effluent water to reduce any remaining treatment burden on Operator A upon receiving the water

Consistently meeting the target rate of 20,000 bwpd by accessing 25 – 50k bwpd moving across the infrastructure system

Influent Effluent

Iron pH ORP NTU Iron pH ORP NTU

Target Spec -- -- -- -- <10 6 to 8 >100 <150

Average 55.6 6.7 (8.4) 280.5 5.4 6.6 553.1 18.4

Range 4 to 94 6 to 7 -66 to 183 127 to 582 0 to 10 6 to 7 286 to 726 9 to 60

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Additional Reuse Examples

Reuse treatment methods today can support barely treated water for frac on the fly,discharge of treated produced water into the environment and rivers, irrigation of crops,water for livestock, and even drinking water

Pacific Rubiales Project. Columbia:

o A wastewater treatment plant sized to accommodate approximately 4,000 m3/h, or 500,000 barrels/dof treated produced water. 90% of the treated water is used for irrigation and in order to meetirrigation standards, the treated water has a total salinity of less than 240 mg/L, with less than 0.5mg/L of hydrocarbons and a sodium adsorption ratio of less than 10.

Water Standard. Colorado:

o Water Standard developed and piloted a proprietary water treatment system to cost effectively treatproduced / flowback water for either re-use in oil and gas operations or discharge into nearby rivers

o Project successfully met stringent regulatory requirements:

o Whole Effluent Toxicity (WET) tests

o Capable of accommodating a wide spec range of inlet water from truck or pipeline with continuoustreatment of 10,000 to 30,000+ bbl/day of inlet water

o Environmentally friendly solution; green flocculent

o Highly flexible system with all-in costs significantly lower than existing alternatives for the operator

• All-in costs are < $1.00 per bbl water processed

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Conclusion: Much is Possible, More in Needed!

• One of the fundamental challenges in the Delaware Basin will be how to manage and balance the resourcesneeded and environmental impact of unprecedented growth projections of more than 2M b/d of oil supplyin the next 5 years

• The significant increase in water production and demand for source water will remain a critical challenge,and cost effective water reuse will be key to balancing water demand and maintaining future growth

• The market needs Midstream Infrastructure players to cost effectively develop, invest in and operatereliable and safe integrated systems; these system can provide a full service model to Operators on a fullyoutsourced basis or can be connected to Producer owned systems for additional capacity and redundancywhile encouraging cost effective reuse

• Technologies exist today to support the growth of the Delaware Basin in New Mexico through costeffective reuse of produced water

• Solaris is not only talking about its commitment to minimizing disposal and supporting extensive reuseacross its network, but has already invested and continues to invest in its integrated “looped” systemworking with Operators to deliver treated produced water

CONFIDENTIAL

“Art of the Possible”. What can we do now that we couldn’t do before, thanks to changes in technology and user behavior? That’s how great organizations drive toward market leadership in a time of significant disruption.Forbes