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May 1, 2017 • Volume 10, No. 05

MidstreamintelligenceServing the marketplace with news, analysis and business opportunities

All Standard Disclaimers & Seller Rights Apply.

Pembina acquiring Veresen in $7.1 billion dealPembina Pipeline agreed to acquire Veresen in deal valued at C$9.7 billion

(US$7.1 billion) in cash, stock and debt, creating a company with a pro forma enterprise value of C$33 billion and a major presence in the Western Canadian Sedimentary Basin.

Pembina is offering to acquire all of the outstanding Veresen common shares

in exchange for either 0.4287 of a common share of Pembina or C$18.65 in cash, with a maximum offer of 99.5 million Pembina common shares and cash consideration of $1.523 billion. The board of directors of both companies have approved the deal, which they expect to close in Q3 or early Q4.The acquisition must be approved by two-thirds of Veresen stockholders.

The combined company will have about 5.8 Bcf/d of gas processing infrastructure and 3.0 MMboe/d of crude oil, liquids and natural gas pipelines.

Permian Basin midstream sees big-dollar acquisitions

For crude and gas producers, the Permian is the place to be and midstream companies are trying to keep up. Three billion-dollar midstream acquisitions were announced this issue and two—EagleClaw Midstream (PG. 12) and Navigator Energy Services (PG. 10)—were in the Permian.

Plains All-American Pipeline is looking at creating a new crude oil link from Permian to the Cushing hub, although it might be a combo of new and existing pipe (PG. 3). Enterprise wants to build a pipeline to bring Permian NGLs to its massive fractionation complex on the Texas coast (PG. 4). DCP Midstream has signed on to be the lead shipper in Kinder Morgan’s planned Gulf Coast Express, whose open season showed enough demand that the pipeline capacity might increase (PG. 3). Kinder Morgan’s CEO said the pipeline giant would decide whether to JV or IPO its costly Trans Mountain expansion in Western Canada, but a preliminary prospectus may give a hint (PG. 5).

Another thing Permian projects have going for them is that they are mainly in Texas. Other states are not so pipeline friendly. New York regulators blocked National Fuel Gas Supply’s Northern Access (PG. 3). Meanwhile, the US Forest Service and the Federal Energy Regulatory Commission are debating whether two pipelines can share one right-of-way (PG. 6).

Williams Partners sold its olefins plant for $2.1 billion to focus on natural gas pipelines (PG. 10). Shareholders okayed the Energy Transfer Partners-Sunoco Logistics merger, but Sunoco LP’s $3.3 billion sale of 1,110 convenience stores suggested it might join the union soon (PG. 7). Flowchem, which makes chemicals to boost pipeline performance, was acquired for $495 million, partly because KMG thinks aging pipelines will need more of its products (PG. 11).

ExxonMobil, SABIC to build massive cracker in TexasExxonMobil and Saudi Basic Industries Corp. (SABIC) want to build the

world’s largest ethylene cracker near Corpus Christi, Texas, adding a potential major consumer of natural gas weeks after two separate companies unveiled pipeline projects

that would send a combined 3.55 Bcf/d of Permian Basin gas to the area. The ethane

steam cracker, capable of producing 1.8 million tonnes of ethylene per year, could come online in 2020, the year after the proposed pipelines come online. The projects add to the attractiveness of Corpus Christi as an export terminal.

Exxon and SABIC announced their intent to build on a 1,400-acre site in San Patricio County, Texas. The JV, dubbed Gulf Coast Growth Ventures, is the first between the companies. The $10 billion petrochemical project would include a monoethylene glycol unit and two polyethylene units.

Plenty Of Takeaway To Support Permian Production

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019 1/1/2020

MBb

ls/d

Permian Produc�on vs. Total Capacity

Produc�on Total Capacity

Source: BTU Analy�cs, Goldman Sachs, RBC Capital Markets, ARM Energy, Plains All American

Source: PDC Energy April 20 Presentation via PLS docFinder www.plsx.com/finder

IN THIS ISSUE

AT PRESS TIME

Continues On Pg 9

Continues On Pg 10

Corpus Christi grows in appeal as export hub as Houston gets crowded.

Pembina & Veresen have assets that are connected or could easily be linked.

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Midstreamintelligence 2 May 1, 2017

Selected Current Midstream Construction ProjectsFacility name

Owner/ Operator Type Flow from Flow to Miles Capacity Diameter Cost

($B)Comple-

tion Notes

Bayou Bridge

Energy Transfer, Sunoco Logistics, Phillips 66

Pipeline, oil Lake Charles, La.

St. James, La. 144 N/A 24-in. $0.75 4Q17

Nederland, Texas, to Lake Charles segment opened in 2016

Crude gathering system

Stakeholder Midstream Pipeline, oil Delaware

BasinDenver City, TX N/A N/A N/A N/A May

2017Crude gathering and trunkline system

Dakota Access

Energy Transfer Partners Pipeline, oil

Bakken, Three Forks, N. Dakota

Patoka, Illinois 1,200 500,000

bbl/d 30-in. $3.8 May 2017

Interstate transport of crude to start in May

Epic Castleton, TexStar, Irownwood Pipeline, oil Permian

BasinCorpus Christi, TX 730 200,000

bbl/d16-,20-,24- and 30-in. N/A 1Q19 Announced March

2017Gulf Coast Express Kinder Morgan Pipeline,

gas Waha, TX Agua Dulce, TX 430 400,000

bbl/d 42-in. N/A 2H19 Open season intrest exceeded capacity

Keystone XL TransCanada Pipeline, oil Hardisty,

AlbertaSteele City, Neb. 1,179 830,000

bbl/d 36-in. $10.0 N/A Got presidential permit from US State Dept.

Midla Natchez

American Mid-stream

Pipeline, gas

Winnesboro, La.

Natchez, Miss. 55 50

MMcf/d 12-in $.06 April 2017

Placed into service on April 4

Midship Pipeline Cheniere Energy Pipeline,

gasOkarche, Okla.

Benning-ton, Okla. 100 1.4 Bcf/d 36-in. N/A 1H19 To apply with FERC in

May Northeast Supply Enhance-ment

Williams Partners Pipeline, gas

York County, Pa.

Rockaway Transfer Point, N.Y.

36 400 MMcf/d

26- and 42-in. $0.926 2Q20 Applied to FERC

North Montney Mainline

TransCanada Pipeline, gas Northern BC Fort St.

John, BC 187 2.4 Bcf/d 42-in. $1.0 2Q19Seeking NEB approval even if Pacific North-West LNG halted

Pacific Connector Veresen Inc. Pipeline,

gasMalin, Oregon

Jordan Cove LNG 232 1 Bcf/d 36-in. N/A 2020 To connect gas to

export terminal

Pecos Trail NAmerico Partners

Pipeline, gas

Permian Basin

Corpus Christi, TX 468 1.85

Bcf/d N/A N/A 2019 Negotiations with ship-pers underway

PennEast UGI Pipeline, gas Dallas, Pa. Penning-

ton, N.J. 120 1.0 Bcf/d 36-in. $1.0 2H18 Received FERC final EIS

Raptor Targa Resources Cryo plant La Salle County, Texas N/A N/A 200

MMcf/d N/A N/A 2Q17 Targa building in JV with Sanchez Production

Redcliff Canyon Mid-stream

Gas processing

Woodward Co., Okla. N/A N/A 200

MMcf/d N/A N/A 1Q18Including gathering system in four STACK counties

Revolu-tion Energy Transfer

Pipeline, gas and cryo plant

Butler County, Pa.

Western Pennsylva-nia

100 100 MMcf/d

24- and 30-in. $1.5 2Q17 Includes fractionation

facility

Rest-havem CSV Midstream Gas

processingResthaven, Alberta N/A N/A 100

MMcf/d N/A N/A 1Q18 Construction to start in Q3

Rodeo Phillips 66 Pipeline, oil Delaware Basin

Odessa, Texas 75 130,000

bbl/d N/A N/A 2H18 Open season underway

Sendero Cryo Plant

Sendero Mid-stream Partners

Gas processing

Delaware Basin N/A N/A 130

MMcf/d N/A N/A 3Q17Long-term commit-ments and funding are secured

Tower processing complex

Veresen Inc. Gas processing

Montney play

Fort St. John, NE BC N/A 20,000

bbl/d N/A $0.715 4Q17 Funded by Veresen and KKR

Valley Cross-ing

Enbridge Pipeline, gas

Agua Dulce, TX

Browns-ville, TX 168 2.6

Bcf/d N/A $1.5 3Q18 Construction to start this month

Source: PLS Research

http://www.plsx.com

MidstreamIntelligenceAccess PLS’ archive for previous midstream newsFor general inquiries, email [email protected]

Volume 10, No. 05 3 infrastructurePlains All-American proposes crude oil project in Permian

Plains All-American Pipeline announced an open season for a Permian-to-Cushing crude pipeline. The PAA project will originate in Midland and Colorado City. Depending on the results of the open season, which will run until May 30 to secure long-term commitments, the committed volumes will move on a combination

of new and existing pipelines. The project could add up to 350,000 bo/d of takeaway capacity with operations in mid-2019.

PAA has been aggressively adding assets in the Delaware Basin this year. It bought the Alpha Crude Connector, a 515-mile crude gathering system in the northern Delaware, for $1.215 billion and joined a 50:50 JV with Noble Midstream to acquire the 70-mile Advantage pipeline for $133 million. The Alpha Crude Connector, which already is connected with PAA’s system in Wink, Texas, will be expanded to 350,000 bbl/d, and PAA will build a pipeline to connect its Reeves County facility to the Advantage pipeline.

Other recently announced Permian crude pipeline projects include Buckeye Partners’ open season for the up to 400,000 bbl/d South Texas Gateway pipeline and Castleton Commodities International, TexStar Midstream Logistics and Ironwood Midstream Energy’s plans for the 440,000 bbl/d Epic pipeline. Both will run from the Permian to Corpus Christi, Texas, and are scheduled to be operational in 2019.


Serving the US upstream industry with information, analysis & prospects for sale Volume 26, No. 08

Petro ScoutMay 21, 2015

e&Pwww.plsx.com

REEVES CO., TX PROSPECT ~4,600-Net Acres.DELAWARE BASINObjectives: Wolfcamp (A,B,C)All Depths. All Rights. L80-Acre Down Spacing Pilots Underway.Subsurface Geology Data Available100% OPERATED WI; 75% NRI WOLFCAMPWolfcamp A Approx. IP: ~1,091 BOEDWolfcamp B/C Approx. IP: ~1,190 BOEDWolfcamp EUR’s: 300-450 MBO/WellPKG UPDATED WITH NEW ACREAGEL 5187DV

COLORADO DRILLING PROJECT~43,700 Net Acres.LINCOLN & KIT CARSON COUNTIES MISSISSIPPIAN / PENN TARGETSMiss-Spergen & Penn-Cherokee. <7,500’. LMultipay Objectives. Shallow Depths.Defined By Extensive 3-D Seismic-- MULTIPAY-- Geology & Geophysics Data.100% OPERATED WI; ~80% NRI221 Active Offset Wells, 150 Offset Permits.L 4489DV

FEATURED DEALS

Hess’s Bakken costs falling, targeting $6.0-6.5MM/well

Hess’s lean manufacturing approach in the Bakken is leading to higher production and cheaper wells. Q1 volumes averaged 108,000 boe/d, up 70% YOY and 6% sequentially. A total of 70 wells were brought online in the play during the quarter, down from 96 in Q4. Well costs fell to $6.8 million from $7.1 million in Q4 and

$7.5 million in 1Q14. Hess expects costs to fall further, with 2015 wells averaging $6.0-6.5 million.

During Q1 Hess reduced its Bakken rig count to 12 from 17 at the end of 2014. The company is running currently eight rigs in the play and will continue with that number for the remainder of the year. D&C plans call for 178 wells drilled, 214 completed and 213 turned to sales compared to 261, 230 and 238 last year, respectively.

Noble’s DJ Basin spud-to-rig release days fall to seven In the DJ Basin, Noble Energy has driven spud to rig release times for 4,500-ft

laterals down to just seven days as of Q1, a 23% reduction YOY. Notably, the company drilled a 9,280-ft lateral in just seven days.

“We’re now averaging seven days from spud-to-rig release for a standard lateral length well, almost as fast as we used to drill vertical wells,” said chairman, president

and CEO David L. Stover during a conference call.The company is drilling

wells so quickly that it will end up drilling more wells than anticipated in 2015 and has taken funds from the Marcellus and reallocated them to the DJ. Currently Noble is drilling 70% of the footage of 2014 with 40% of the rigs. The company ended Q1 running four rigs and one completion crew in the DJ. In H2, an additional completion crew will be added as needed.

Reduced drilling times and equipment optimization has led to a 5-15% reduction in costs vs. 2014. Noble foresees further savings via lower service costs and possible use of slickwater, which could save $2.0 million per well.

Parsley’s rookie hz drilling season delivers peer-leading resultsParsley Energy’s well performance has continuously improved since it began

drilling horizontal wells a year and a half ago. The company has drilled 30 Wolfcamp A or B wells thus far and, based on the 30-day data, recently introduced a type curve with

estimated recoveries of 1 MMboe. In the Wolfcamp B during Q1, the 30-day peak IP per 1,000 ft of lateral improved 30% YOY to 231

boe/d. According to COO Matt Gallagher, the improved performance is owed to higher stage density, more slickwater stages, increased proppant per stage and optimal placement of the lateral within the zone.

Parsley’s improved wells are outperforming many of its peers in the Midland Basin. In Upton County, the company’s Wolfcamp B 24-hr IPs are 75% higher than the average when adjusted for lateral length. The Ratliff-28-1 H Wolfcamp B well is credited with flowing the highest reported oil rate of all horizontals in Upton, according to IHS. In Reagan County, data suggests Parlsey’s 24-hr IPs for Wolfcamp B wells are 55% higher than the county average when adjusted for lateral length.

Devon surges past guidance on Eagle Ford performanceCompletion mods push positive results across multiple plays

Fueled by the Eagle Ford, Devon’s oil production exceeded guidance by 12,000 bo/d during Q1 at 272,000 bo/d. Based on the results, the company has increased its oil growth target from 20-25% to 25-30% (270,000 bo/d) for the full year. Q1 overall

volumes also overshot guidance, averaging 685,000 boe/d (60% liquids), up 3% vs. Q4 and 22% YOY. Devon expects volumes to grow 5-10%

this year to an average of 667,000 boe/d. Capex was reduced by $250 million to $3.9-4.1 billion on an improved LOE outlook and accretive midstream transactions.

Since it took control of the Eagle Ford position it acquired from GeoSouthern in March 2014, Devon has grown production in the play 140% to 122,000 boe/d (62% oil). In the last quarter alone volumes jumped 24,000 boe/d, exceeding expectations and creating a bottleneck that will prevent growth in Q2.

Devon’s Eagle Ford drilling is concentrated in the Lower Eagle Ford where the company added 79 new wells to production in Q1.

Eagle Ford output has risen 140% since it took over the assets in March 2014.

Continues On Pg 4

Continues On Pg 21

Continues On Pg 6

Bakken well costs stood at $7.1MM at YE14, already down to $6.5MM in '15.

Continues On Pg 22

Noble nearly drilling horizontals in the time it used to take it to drill a vertical.

Wolfcamp B rates are 75% higher than peers in Upton County.

Big Oil positioned to compete in Permian Basin.

PetroScout April 3

New York regulators halt Northern Access pipeline

New York environmental regulators have blocked the Northern Access pipeline, a National Fuel Gas Supply Corp. $455 million project to take natural

gas from the Marcellus to New York. National Fuel’s CEO attacked the decision as setting

a “new standard that cannot possibly be met by any infrastructure project in the state that crosses streams or wetlands.”

Construction was to begin this month, but the decision by New York State Department of Environmental Conservation throws the project in doubt. National Fuel said it was still

“analyzing the NYS DEC’s rationale.” FERC approved construction of the 490 MMcf/d pipeline in February.

National Fuel President and CEO Ronald Tanski said numerous studies proved that only “temporary and minor” damage would be done to the state’s waters. “These construction activities would certainly have less effect than either exploding an entire bridge structure and dropping it into Cattaraugus Creek or developing and continuously operating a massive construction zone in the middle of the Hudson River for a minimum of five years, both NYS DEC-approved projects,” the CEO said in a statement.

The pipeline would have crossed 192 creeks or streams on its 97-mile journey north from McKean County, Pennsylvania, to National Fuel’s Porterville compressor station in Elma, N.Y. The NYS DEC said, “We are confident that this decision supports our state’s strict water quality standards that all New Yorkers depend on.” The project drew more than 5,700 comments.

Last April, the agency rejected Williams’ proposed Constitution pipeline on similar grounds. That case is under appeal.

DCP signs on to Kinder's Permian-to-South Texas pipelineDCP Midstream has joined Kinder Morgan’s plan for a 1.7 Bcf/d pipeline

shipping gas from the Permian Basin to South Texas, a key endorsement for the recently announced project. DCP, which has approximately 1.3 Bcf/d of processing capacity in the Permian, said it will act as a partner and lead shipper of the 430-mile Gulf Coast Express, a 42-in. pipeline

from the Waha, Texas, area to Agua Dulce. The pipelineʼs planned capacity might also be enlarged after an open

season drew bids greater than the proposed capacity of the project. While DCP has signed an LOI to participate as a partner or a shipper, Kinder

Morgan will build and operate the pipeline. Financial terms were not disclosed. During KMI’s investor conference call, CEO Steven Kean said Kinder Morgan expects to have the deal finalized “in the next 90 days or so.”

“DCP’s assets in the Permian would provide good upstream connectivity and our Texas intrastate network would provide excellent downstream connectivity to Mexico, LNG at Corpus Christi and utility in industrial markets along the Texas Gulf

Coast,” Kean said.DCP operates Sand Hills, a NGL

pipeline from the Permian to Mont Belvieu, which is 250 miles northeast of Agua Dulce. The largest NGL producer and gas processor is expanding Sand Hills from 280,000 bbl/d to 365,000 bbl/d. Wouter van Kempen, chairman, president and CEO of DCP Midstream, said the Gulf Coast Express provides a “competitive alternative that adds diversity to the market” and complements Sand Hills.

A price for the Gulf Coast Express, which is expected to begin operations in 2H19, has not been released, but Kean told investors it would be “north of $1.0 billion.”

Another advantage of the Gulf Coast Express is that it is entirely in Texas, reducing federal oversight. “So if the demand is there, and it’s there in a hurry, we can move more quickly,” he said.

Shipper interest during open season exceeded capacity.

Pipelines

The Northern Access crosses 192 creeks or streams in 97 miles.

N.Y. regulators blocked Constitution pipeline last year.

Gulf Coast Express price tag to be ‘north of $1.0B.’

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Enterprise NGL pipeline to link Permian, Mont Belvieu Enterprise Products Partners plans to build a 571-mile NGL pipeline from the

Permian Basin to the Texas Gulf Coast. While major crude and natural gas pipeline projects running from Permian to East Texas have been announced in the past couple

of months, Enterprise is the first to specifically target NGLs.The 24-in. Shin Oak NGL pipeline is scheduled to start at 250,000 bbl/d

in 2Q19 and designed to be expandable to 600,000 bbl/d. It will start at Enterprise’s Hobbs NGL fractionation and storage facility in Gaines County, Texas, and end at Enterprise’s NGL fractionation and storage complex in Mont Belvieu, the largest of its kind in the world, with 130 MMbbl of underground storage capacity, and 670,000 bbl/d of NGL fractionation capability.

“The Permian Basin is currently the hottest play in North America and is expected to continue its strong growth for years to come,” said A.J. “Jim” Teague, CEO of Enterprise’s general partner. “The Shin Oak pipeline project is part of Enterprise’s larger plans in the Permian to leverage our integrated midstream assets to link supplies of cost-advantaged US hydrocarbons to the largest domestic and global NGL markets. This additional pipeline takeaway capacity to Mont Belvieu will provide Permian producers the flow assurance they need.”

The pipeline will provide takeaway capacity for mixed NGLs extracted at natural gas processing plants in the Permian. At the destination point, the Mont Belvieu complex is connected by pipeline to the Gulf Coast petrochemical industry and Enterprise’s liquefied petroleum gas (LPG) and ethane export terminals on the Houston Ship Channel.

Canadian Mainline toll cut came ‘just in time,’ producer saysTransCanada’s reduced tolls for natural gas transport on the Canadian Mainline

can “just in time” for Western Canadian producers to compete with US supplies, the CEO of Tourmaline Oil said. In an effort to boost volumes on the pipeline from Alberta to the Dawn Hub in Ontario, TransCanada cut tolls by 46%.

The pipeline company attempted a rate cut to lure gas producers back to the Canadian Mainline last year, but the gas industry rejected it as inadequate for Canadian gas to compete. Before a March open season,

TransCanada negotiated with producers including Tourmaline, Canada’s second-largest natural gas producer. “We both ended up a little grumpy in the end, which probably says it’s the right toll,” Mike Rose, chairman, president and CEO of Tourmaline, told The Globe and Mail of Calgary.

Looming over the negotiations was the Rover pipeline, an Energy Transfer Partners project, which received US government approval in February. The 3.25 Bcf/d pipeline will collect gas from the Marcellus and Utica with a portion of it heading for the Dawn Hub starting in H2, potentially slashing the market share of Western Canadian gas in Canada’s East Coast.

“Once you lose it, it will be very hard to get back,” Rose said. “I would say that the timing is just in time.”

TransCanada has declared the open season a success and applied on April 26 for regulatory approval of the new toll structure of C$0.77/GJ with the National Energy Board. Karl Johannson, TransCanada EVP and president of its natural gas pipelines, said he expects opposition to the new rates, called the Dawn Long-Term Fixed Price Service, including from some companies stuck with the older, higher tolls and others who think the new tolls are still too high given current spot prices. However, Johannson said he is

“quite comfortable” that TransCanada can defend the new toll structure before the NEB.

Pipelines

The Canadian Mainline toll cut came amid threat of US gas supplies entering Ontario from the Dawn Hub.

ETP joins those taking aim at ‘Buy American’ steel mandate

Energy Transfer Partners, whose Dakota Access pipeline got a major push from the Trump administration, came out against another Trump initiative: that pipelines built in the US use American-made steel. “If the US pipeline industry were constrained to only domestic steel and pipe mills, we do not believe the domestic producers have sufficient capacity,” ETP wrote. “The impacts of such a restriction are expected to severely delay project schedules, drive up costs, decrease availability and lower quality.”

ETP said the US steel industry lacks the necessary capacity. It used 57% US-made steel in building Dakota Access. However, when it purchased domestic pipe for three projects, “we in effect consumed the entire domestic capacity.” CEO Kelcy Warren donated more than $100,000 to the Trump campaign and $250,000 to his inauguration committee.

A coalition of oil, natural gas and pipeline associations, which included the American Petroleum Institute, also contributed a 39-page report criticizing the plan, saying it could delay projects and limit US pipeline job growth.

Steel producers sent comments in favor of the rule, saying they could meet the demand. “It is in the economic and national security interest of the United States to promote and defend the broad capability of domestic steel producers to supply the energy sector,” wrote US Steel Corp.

Cutting-edge oil & gas intelligence

Directly leverage an expansive wealth of energy industry data.

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Volume 10, No. 05 5 infrastructure

PennEast receives positive final EIS from FERC

The PennEast pipeline will have “less than significant” effects on the environment, the Federal Energy Regulatory Commission reported in its final environmental impact statement.

The consortium behind the 120-mile project, PennEast Pipeline Co.,

praised the ruling as a “clear win for the region, business competitiveness, economic growth and job creation.”

The final EIS said the recommended mitigation measures would effectively limit erosion and contamination during construction. FERC staff will ensure that the project complies with endangered species and historic preservation laws.

PennEast said the FERC statement validated nearly three years of scientific review. The company, which is owned by AGL Resources, NJR Pipeline Co., SJI Midstream, Enbridge and UGI Energy Services, said the project is more than 90% subscribed.

The $1.2 billion project will deliver natural gas from the Marcellus shale in northern Pennsylvania to New Jersey. The project has already received environmental approval from the Pennsylvania regulators, and the company filed for freshwater and wetlands permits from the New Jersey Department of Environmental Protection on the day before the final EIS came out.

Only a few days later, the New Jersey regulators sent a letter that the application was missing information and questioned whether some property easements had the proper signatures and gave PennEast 30 days for revisions. The Army Corps of Engineers also told FERC that it can not grant a permit because PennEast had not completed enough land surveys when it submitted its application in February 2016.

The company still expects FERC to issue its certificate of public convenience and necessity this summer with a 2H18 in-service date expected. However, because of a lack of quorum, FERC cannot issue certificates until another commissioner is nominated by President Trump and confirmed by the US Senate.

Pipelines Kinder Morgan to announce Trans Mountain JV or IPO in Q2Kinder Morgan has filed a preliminary prospectus for an initial public offering of

its Canadian assets, but that might not be the fate of its Trans Mountain expansion project. CEO Steven Kean said during a Q1 earnings conference call that Kinder Morgan will choose between a joint venture or an IPO for the Trans Mountain expansion this quarter.

Both the JV and IPO processes are running simultaneously, so Kinder Morgan can weigh the value of each. After one is chosen, Kean said, a final investment decision on the expansion will follow.

A few days after Kean’s comments, Kinder Morgan Canada Ltd. filed its preliminary prospectus for an IPO, which would include not only Trans Mountain but also the Puget Sound pipeline, the Jet Fuel pipeline system and the Canadian portion of the Cochin pipeline system. The prospectus noted that the filing was consistent with the conference call’s commitment to examine all financing options. The project to expand Trans Mountain’s capacity from 300,000 bbl/d to 890,000 bbl/d is now expected to cost $5.7 billion, which is nearly half of Kinder Morgan’s backlog.

The CEO also highlighted Kinder Morgan’s two major projects in the Permian Basin. Announced in March, the 1.7 Bcf/d Gulf Coast Express from Permian to South Texas will cost “north of $1 billion” (PG. 3) but is not yet included in the backlog.

Kinder Morgan is also expanding the El Paso Natural Gas pipeline takeaway capacity to the Waha Hub with an open season underway for 150 MMcf/d and another 900 MMcf/d under consideration. Kean said the project would be

“relatively inexpensive” because it is building off of existing infrastructure. “That’s 150 without moving a muscle,” he said. “We have got that capacity available and we can do it today.” The first half of the possible 900 MMcf/d expansion was also described as inexpensive—“It’s back-pressure valves and things like that.”

In Ohio, the 50,000 bbl/d Utopia pipeline is on track, Kean said, despite an eminent domain defeat in court last October. Tree felling is underway, alternative routes are being secured, and the 215-mile, 12-in. pipeline should be in service in January 2018.

KMI: $11.7B Backlog Full Of ‘Attractive’ Projects• World class asset footprint has driven attractive growth opportunities, secured by long-term,

fee-based contracts with creditworthy counterparties

— ~88% of backlog is for fee-based pipelines, terminals and associated facilities

— ~$1.6 billion of annual Adjusted EBITDA expected to be generated from growth projects(b), excluding CO2, an approximate 6.7x investment multiple(c)

— Target at least 15% unlevered after-tax return to fund CO2 projects

• We anticipate achieving a JV or IPO of our Trans Mountain expansion project; backlog currently includes 100% of the project pending further progress

Segment

Growth Projects(a)

($B) Natural Gas Pipelines $3.5 Products Pipelines 0.3 Terminals 1.4 KM Canada 5.4 Subtotal non-CO2 10.6 CO2 – S&T(d) 0.3 CO2 – EOR(d) 1.1 Total $12.0 $-

$0.4

$0.8

$1.2

$1.6

2017 2018 2019 2020 2021

~$1.6B of Adjusted EBITDA from non-CO2 Backlog Projects(b)

Source: Kinder Morgan March 2 Presentation via PLS docFinder www.plsx.com/finder

Projects Mentioned:• Trans Mountain expansion• Gulf Coast Express pipeline• El Paso Natural Gas expansion• Utopia crude pipeline in Ohio

El Paso pipeline can increase its capacity by 150 MMcf/d ‘without moving a muscle,’ the CEO said.

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Pembina shrinks planned LPG terminal, moves it to CanadaPembina Pipeline has changed the size and location of a planned liquefied

petroleum gas (LPG) export terminal from Oregon to British Columbia, signing a nonbinding LOI to put it at Prince Rupert. The company has been looking to develop

a $125-175 million West Coast Terminal. The project, with an estimated capacity of 20,000 bbl/d LPG,

is still two years from a final investment decision. The site on Watson Island, which is managed by Prince Rupert Legacy, a subsidiary of the City of Prince Rupert, has an existing dock adequate for activities related to LPG export and well-established rail connections.

If built, the Pembina project would be the second Port of Prince Rupert propane export terminal. AltaGas announced its FID in January to begin construction on the C$475 million Ridley Export Terminal with exports planned for 2019, which would make it Canada’s first propane export terminal on the West Coast.

Pembina originally planned for the West Coast Terminal to have a capacity of 37,500-75,000 bbl/d of propane and butane. “In light of our plans to develop a world-scale polypropylene production facility, the smaller export facility we are contemplating for Watson Island—utilizing smaller ships and ensuring very competitive per-unit export facility costs—makes good sense for Pembina,” said Stuart Taylor, SVP, NGL & Natural Gas Facilities.

Several LNG export terminals have been announced at Prince Rupert, but none has been built yet. Shell canceled the proposed Prince Rupert LNG project that it inherited from its acquisition of BG after deciding other options offered better prospects.

In other Pembina projects, the company reported that it is advancing engineering for its 100 MMcf/d Duvernay II facility and has begun preliminary engineering for substantial liquids handling and stabilization at the Duvernay I facility, which is expected to come into service in Q4.

A&D

Fed agencies argue whether 2 pipelines can share a routeThe US Forest Service and the Federal Energy Regulatory Commission have

continued their battle over the Atlantic Coast pipeline. In its draft environmental impact statement, FERC was skeptical of a proposal to merge the paths of Atlantic Coast with the Mountain Valley pipeline, but the Forest Service said the idea required more consideration.

FERC said that merging the two projects “result in a significant delay to the delivery of the 3.44 Bcf/d of natural gas to the proposed customers of both ACP and MVP and would limit the ability to provide additional gas to the projects’ customers,” and that there is insufficient space for placing two 42-in. pipelines side-by-side. However, the Forest Service said “detailed comparison of feasibility and environmental impacts is needed.”

The Atlantic Coast pipeline would run 600 miles from West Virginia through central Virginia to North Carolina and cross the Monongahela National Forest in West Virginia and the George Washington National Forest in Virginia. Dominion Resources is the lead utility behind the project with Duke Energy, Piedmont Natural Gas and Southern Company Gas as partners.

The 300-mile Mountain Valley pipeline would go from northwestern West Virginia to southern Virginia, including the Jefferson National Forest in West Virginia, and is being built by a JV of EQT Midstream Partners, NextEra US Gas Assets, Con Edison Transmission, WGL Midstream and RGC Midstream.

“They are two separate projects and are serving two different markets. It is not feasible to share the right-of-way or to have a single pipe,” a spokesman for Dominion told the Roanoke Times.

Pipelines

Developments & Trends

A final investment decision remains two years away.

Enbridge makes $2.2B deal to turn EEP into pure-play

Enbridge Inc. will buy Enbridge Energy Partners’ interest in the Midcoast Gas Gathering & Processing business for cash consideration of $1.31 billion plus existing indebtedness of Midcoast Energy Partners (MEP), which was $840 million in Q1. The transaction came after Enbridge decided to make EEP focus on liquids pipelines following a strategic review.

The previously announced privatization of MEP closed on April 27, so now 100% of the Midcoast business will be owned by Calgary-based Enbridge, through its US subsidiary Enbridge Energy Company, Inc. (EECI). In addition, EEP will repay $1.6 billion in preferred units outstanding to EECI, including $357 million of accumulated deferred distributions.

EEP will redeem the $1.2 billion in face value of the units by issuing $1.2 billion of common units to EECI and repay the deferred distribution with some of the cash from the sale of Midcoast assets to Enbridge. These moves simplify EEP's capital structure and improves its credit profile, Enbridge said.

As a result of the restructuring, Enbridge will acquire all of EEP's gas gathering and processing business and 99% WI in L3R in exchange for approximately $1.1 billion in net cash and the transfer to EEP of a 15% WI in the Eastern Access Expansion.

Al Monaco, president and CEO of Enbridge, said “removing unnecessary complexity” its sponsored vehicles has been a priority. In addition to making EEP a liquids pipeline pure-play, Enbridge will have also turned Spectra Energy Partners into a natural gas pipeline pure-play MLP. Enbridge also has an interest in DCP Midstream, a pure-play gas gathering and processing business.

Following the transaction, EEP, Spectra Energy and DCP Midstream to all become pure-plays.

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Volume 10, No. 05 7 infrastructurePipeline delays could choke 1 MMbbl/d Canada crude surge

Western Canadian crude oil production could increase by 1 MMbbl/d by 2020, further straining the pipeline system and raising the stakes for each delay in any proposed pipeline project. However, if the four major pipeline projects —Enbridge’s Alberta Clipper expansion, TransCanada’s Energy East and Keystone XL and

Kinder Morgan’s Trans Mountain expansion—advance on schedule, they could add 2.9 MMbbl/d of new capacity from 2019-2022, pushing Western Canadian pipeline takeaway capacity from shortage to surplus, says a new

report from IHS Markit.However, delays could be considered the norm. The review process for major

pipeline proposals has averaged more than five years from the first application, according to a survey conducted for the report.

“The need for new pipelines departing Western Canada has not diminished with lower oil prices, quite the opposite,” said Kevin Birn, energy director for IHS Markit. Capacity constraints have added to price volatility and affect crude prices between regions. During a five-month transport crunch starting in November 2012, Western Canadian Select crude realized $30/bbl less than the similar-quality Mexican Maya, costing the industry $6.0 billion in lost revenue, according to the report.

The US Gulf Coast was labeled as the most likely market for increased production, but the report warned that the delay of Keystone XL and the possibility of increased US protectionism should remind Western Canadian producers not to be too linked to one market.

Even if the four major proposed crude pipelines stay on schedule, none of them will go online before 2019. IHS Markit said that means a resurgence in crude-by-rail shipments through the end of the decade. Improvements in crude-by-rail infrastructure, such as loading terminals and railcars, will reduce the discount for Western Canadian crude, Birn said.

Pipeline M&A YTD

Date Buyers Sellers

Deal Value ($MM)

Deal Type

Asset Type

Primary Asset

04/18/17TPG Capital; Trinity CO2 Investments

Trinity Midstream N/A JV CO2

CO2 pipeline and handling capacity

04/03/17 Tallgrass Energy Partners

Tallgrass Development $400 Drop

down Gas 25% in Rockies Express

02/27/17 TC Pipelines TransCanada N/A Drop down Gas

PNGTS and Iroquois Gas Transmission System

02/13/17 MPLX Enbridge Energy Partners $220 Asset Oil Ozark Pipeline

02/13/17Noble Midstream Partners; Plains All American Pipeline

Advantage Pipeline $133 JV Oil Advantage

Pipeline

01/30/17 Mirage Energy 4Ward Energy Corp. Gas

01/24/17 Undisclosed Plains All Ameri-can Pipeline $310 Asset Gas

01/18/17 Valero Energy Partners

Plains All Ameri-can Pipeline $70 Asset Oil 40% in Red

River Pipeline Note: Based on deals with disclosed values. Source: PLS Global M&A Database

Review process for major pipeline projects takes five years, according to a survey.

April 15, 2016

Canadian SCout


Painted Pony Petroleum keeps up drilling pacePainted Pony Petroleum is one of the

few companies with a stepped-up drilling program this year, with the 13 wells (100% WI) drilled YTD more than twice the six

wells it drilled in 1Q15. Nine wells have been completed this year compared with five at this

point last year. It plans 14 completions in H1 and 30 completions for the year.

Painted Pony’s volumes in Q1 averaged 96 MMcfe/d, up 3% sequentially

and down 2% YOY. The company also has 3 MMcfe/d of production shut in on low commodity prices. Painted Pony expects Q2 volumes to average 93-99 MMcfe/d.

Painted Pony is trimming its capital program to $179 million, down 9% from the $197 million budget it released in January.

Tamarack Valley hits production records in 4Q15Tamarack Valley Energy hit record

production of 9,968 boe/d (61% oil and NGLs) in 4Q15, up 14% sequentially

and 30% YOY thanks to a successful drilling

program in the second half of the year. Volumes for the year averaged 8,448 boe/d, up 48% from 2014 volumes. The company also surpassed its exit rate target of 9,500-9,700 boe/d on capital spending of $107.4 million, down 15% lower at midpoint than guidance of $125-130 million. It saw increased capital efficiencies thanks to permanent

drilling and completion design changes, lower services costs and better well performance in the Wilson Creek and Alder Flats areas of Alberta.

During the first part of 2015, Tamarack Valley halted drilling and instead focused on D&C well redesigns, which resulted in permanent cost reductions that enabled the company to sustain its operations despite lower oil prices.

Serving the Canadian upstream industry with information, analysis & prospects for sale Volume 25, No. 05

WESTERN ALBERTA ASSETS~65-Net Wells. 33,236-Net Acres.SPIRIT RIVER GROUPTargets: Cardium, Dunvegan, Falher, -- PP-- Codotte, Wilrich, Notikewin, Bluesky, ---- Gething & Cadomin3D & 2D Seismic Data Available. ~8,0002015 Avg Production: ~7,900 BOED BOED2015 Avg Royalty Production: ~100 BOED2P 2015 Reserves: 28 MMBOEAGENT WANTS OFFERS APRIL 2016PP 13493DV

ALBERTA & SASKATCHEWAN ASSETS19-SWD Wells.LLOYDMINSTER, EDAM & MANITOULAKE AREAS PP~150 Prospective Drilling Locations.OPERATED & NonOperated WI 2802013 Proved/Probable Rsrvs: 9.4 MMBOE BOEDPV10: $153,000,000Well Costs: $625,000PP 13271DV

DEALS FOR SALEPainted Pony Charges Toward Growth Despite Low Prices

761 1,553 2,849 4,2206,589

8,693

13,19215,604

23,000

48,000

23 44

61 71 93 98

157 145

475

0

50

100

150

200

250

300

350

400

450

500

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017FAn

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Ave

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per

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illio

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ares

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• 156% Compound Annual Growth in produc�on, 2007 – 2015• 32% Compound Annual Growth in produc�on per share, 2007 - 2015

Q4 201640,000 Boe/dForecast Exit

230

Annual Average Daily Produc�on per 1 Million Weighted-Average SharesOil & NGLsNatural GasQ4 2016 Exit Produc�on

Source: Painted Pony April 6 Presentation via PLS docFinder www.plsx.com/finder

Regional ActivityApril 2016 Top 10 Alberta Operators by License CountDevon NEC Corp 51CNRL 18Cenovus FCCL Ltd 5Jupiter Resources Inc 2Vesta Energy Ltd 1Camfield Groundwater Services Ltd 1

Total 78

Permits by FormationLicenses by Zone Apr Mar FebMcMurray Fm 56 8 38Dina Mbr 16 11 2Spirit River Fm 2 2 7Quaternary System 2 - 4Duvernay Fm 1 34 7Milk River Fm 1 1 1Grand Rapids Fm - 11 2Wilrich Mbr - 10 9Montney Fm - 8 12Other - 40 55

Total 78 125 137Source: PLS Research

The 13 wells drilled YTD more than twice the six wells drilled in 1Q15.

Increased efficiencies on permanent drilling and completion-design changes.

Continues On Pg 4

Continues On Pg 6

Devon causes spike in permitting activity, gaining 51 permits at the beginning of April.7G’s cheaper wells to propel

2017 production push.

Canadian Scout March 30

Noble Midstream gets 64,000-acre dedication

Noble Midstream Partners has added 64,000 net acres in Reeves County, Texas, to its infield crude oil and produced water gathering, and substantially all of the acquired acreage was dedicated for infield gas gathering. The acreage was dedicated by Noble Energy to Noble Midstream’s Blanco River development company (Blanco River DevCo) upon the completion of Noble’s acquisition of Clayton Williams Energy.

In addition, Noble Energy has dedicated infield gas gathering on substantially all of their legacy 47,000 net acres in the Delaware Basin to BlancoRiver DevCo, a JV between Noble Midstream (25% WI) and Noble Energy (75% WI). Noble Midstream will have Delaware Basin field gathering dedications of 111,000 net acres for crude oil, with substantially all also dedicated for gas gathering. Noble Midstream also includes crude transmission and through a 50% WI in the Advantage pipeline.

ETP shareholders approve deal by Sunoco Logistics

With 88% of Energy Transfer Partners shareholders voting in favor its acquisition by Sunoco Logistics Partners (SXL), the second-largest midstream MLP was officially created on April 28. The result was announced at a special shareholder meeting on April 26.

ETP shareholders will receive 1.5 SXL common units for each ETP common unit. However, the combined company will be called Energy Transfer Partners, LP, and be run by ETP’s current management team including CEO Kelcy Warren and CFO Matt Ramsey. Both ETP and SXL are under the umbrella of Energy Transfer Equity.

When the deal was announced, Sunoco LP was to remain separate from the ETP/SXL merger to operate ~1,345 convenience stores. However, Sunoco LP has agreed to sell 1,110 of those stores to 7-Eleven, Inc. for $3.3 billion. .Many analysts to see the deal as a precursor for a roll-up with ETP.

A&D

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FERC Pipeline Approvals YTDCompany/Project Capacity

(MMcf/d)Miles of

PipeCompression

(HP) States Filing Date, Issue Date

National Fuel Gas Supply Corp/Empire Pipeline, Inc./Northern Access 2016 Project 497 99.8 27,564 NY, PA 03/17/2015,

02/03/2017Transcontinental Gas Pipe Line/ Atlantic Sun-rise Project 1,700 196.5 132,000 MD, NC, PA, SC, VA 03/31/2015,

02/03/2017

Rover Pipeline LLC/Rover Pipeline Project 3,250 511.5 213,420 OH, PA, WV 02/20/2015, 02/02/2017

Panhandle Eastern Pipe Line Co./Panhandle Backhaul Project 750 0 0 IN, IL, MI, OH 02/23/2015,

02/02/2017

Trunkline Gas Co./Trunkline Backhaul Project 750 0 0 IL, MS, TN 02/23/2015, 02/02/2017

Tennessee Gas Pipeline Co./Orion Project 135 12.9 0 PA 10/09/2015, 02/02/2017

Dominion Carolina Gas Transmission/ Transco to Charleston Project 80 60 7,600 SC 03/09/2016,

02/02/2017Northern Natural Gas Co./Northern Lights 2017 Expansion 75.9 4.8 15,900 MN 06/24/2016,

01/31/2017

Marshall County Mine Panel 17W Project N/A 1 0 WV 09/15/2016, 01/26/2017

Algonquin Gas Transmission, LLC & Maritimes & Northeast Pipeline, L.LC/Atlantic Bridge Project 239 6.3 26,500 CT, MA, NY 10/22/2015,

01/25/2017Columbia Gas Transmission/Leach Xpress Project 1,530 160.7 143,800 OH, PA, WV 06/08/2015,

01/19/2017Columbia Gulf Transmission, LLC/Rayne Ex-press Expansion 621 0 51,800 KY 07/29/2015,

01/19/2017

FERC Major Pipeline Projects PendingCompany/Project Capacity

(MMcf/d)Miles of

PipeCompression

(HP) States Filing Date

Driftwood Pipeline LLC / Driftwood LNG Project 4,000 96 269,500 LA 03/31/17

Transcontinental Gas Pipe Line Co./ Northeast Supply Enhancement 400 37.1 53,902 NJ, NY, PA 03/27/17

Northern Natural Gas Co./ Lake Mills CS Project 53 0 15,900 IA 03/15/17Venture Global Gator Express, LLC/ Gator Express Pipeline Project serving Venture Global Plaquemines LNG terminal 3,940 26.8 0 LA 02/28/17

Gulf South Pipeline Co./Costal Bend Header Project Amendment 23.5 0 4,734 TX 02/22/17Spire STL Pipeline LLC/Spire STL Pipeline Project 400 66 0 IL, MO 01/26/17

Eastern Shore Natural Gas Co./ 2017 Expansion Project 61.2 39.6 3,750 PA, MD, DE 12/30/16

Pomelo Connector, LLC/Pomelo Connector Pipeline 400 14 5,000 TX 12/23/16Kinder Morgan Louisiana Pipeline LLC/Sabine Pass Expansion Project 600 1.6 47,700 LA 12/13/16Portland Natural Gas Transmission System 42 0 0 NH, ME 12/12/16Port Arthur Pipeline, LLC/Port Arthur Pipeline Project (see Port Arthur LNG) 2,000 38.8 65,052 LA, TX 11/29/16Valley Crossing Pipeline, LLC/ Border Crossing Project 2,600 0.2 0 TX 11/21/16Dominion Cove Point LNG, LP/Eastern Market Access Project 294 0 31,370 MD, VA 11/15/16ANR Pipeline Co./ Wisconsin South Expansion Project 231 0.5 6,130 IL, WI 11/03/16Florida Gas Transmission/East-West Project 275 24.7 0 LA, TX 10/31/16

FERC Pending Storage ProjectsCompany (Storage Field or Project) Storage Field/Project State(s) County/ Parish Working Gas Capacity (Bcf)

Tres Palacios Gas Storage LLC Tres Palacios Gas Storage Facility Amendment TX Colorado, Matagorda,

Wharton -7.41

Source: PLS Research

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Stakeholder Midstream buys Delaware Basin gas system

Stakeholder Midstream is buying Norwest Shelf infrastrcuture from Lucis Energy in southeastern New Mexico.

Stakeholder described its acquisition of the

Lovington Gas Gathering System as something rare: a “lower-cost” play in the Permian Basin.

“We see a significant opportunity in the Northwest Shelf, where there is increasing activity by producers focused on acreage that provides not only attractive returns, but also a lower-cost entry point than some of the core areas of the Midland and Delaware basins,” said Rob Liddell, principal and co-CEO of Stakeholder, founded in 2015 and backed by EnCap Flatrock Midstream. Lucid is also backed by EnCap Flatrock.

The system includes 295 miles of gas gathering lines, 7,400 hp of compression and a 35 MMcf/d refrigeration plant. Stakeholder said the system will complement its newly constructed San Andres crude gathering system in Yoakum County, Texas, and Lea County, New Mexico. The San Andres system consists of 60 miles of gathering lines with multiple midstream connections and will be fully operational in early May.

Lucid remains heavily involved in the Delaware and Midland basins with 1,700 miles of natural gas pipelines. It is also expanding its Red Hills Gas Plant in southeastern New Mexico to 310 MMcf/d, which should be ready by the middle of the year.

A&D

The JV was looking for a site to convert abundant US gas resources into petrochemicals. Corpus Christi offered proximity to natural gas produced in association with renewed crude drilling in the Permian Basin.

In March, two major pipeline projects were announced to transport Permian gas to South Texas. NAmerico Partners plans to build the Pecos Trail pipeline that will send

1.85 Bcf/d to Corpus Christi. Kinder Morgan has already held an open season for the 1.7 Bcf/d Gulf Coast Express, with bidder interest strong enough that the Waha-to-Agua Dulce pipeline’s capacity may increase (PG. 3).

Gulf Coast Growth Ventures is the latest in a wave of projects coming to the Corpus Christi Bay area. As growth in the Houston Ship Channel area makes midstream projects harder to build, the port 200 miles to the south has become an appealing alternative.

Cheniere Energy is constructing a LNG export terminal on Corpus Christi Bay with potential capacity of up to 22.5 mpta. Two of a potential five trains are under construction with a final investment decision on Train 3 expected soon.

Two other Permian-to-Corpus crude pipelines were recently announced. Castleton Commodities International, TexStar Midstream Logistics and Ironwood Midstream Energy are planning the 440,000 bbl/d Epic pipeline with a 1Q19 in-service date planned. Buckeye Partners is proposing a crude oil pipeline of up to 400,000 bbl/d for 2019 in-service, a plan that includes Buckeye adding a Suezmax dock its Corpus Christi hub.

Corpus Christi is already connected to 10 pipelines capable of bringing in 2 MMbbl/d of crude from Eagle Ford. The Plains All-American Cactus pipeline delivers 250,000 bbl/d of crude from the Permian to Gardendale, where connects with the 600,000 bbl/d

Eagle Ford pipeline operated by a PAA/Enterprise Product Partners JV.

“Given that existing refining capacity and dock infrastructure in Houston is congested already, the investment to get incremental new barrels delivered to tidewater at Corpus Christi for export makes sense,” said research firm Morningstar.

Gas Processing

ExxonMobil, SABIC to build massive cracker Continued From Pg 9

Associated gas coming from Permian drilling led JV to Corpus Christi.

Corpus 'makes sense' with Houston congested.

Cheniere LNG Project One of Many In Corpus Christi§ Sufficient firm pipeline capacity

for Train 1 and Train 2 operations secured

§ Once CCPL is completed by end of 2017, Gas Supply ready to commission pipeline and compression needed for CCL commissioning in 2018

§ CCL has built out a geographically diverse infrastructure portfolio that reaches back to multiple supply sources

§ Building multiple paths into CCPL

§ Prepared for execution of additional commitments when commercialization of Train 3 is reached

NGPLTennessee GasHPLKM TejasTransco

PotentialSupply Points

Source: Cheniere Energy April 19 Presentation via PLS docFinder www.plsx.com/finder

Complete transaction services for sellersHelping clients market non-core assets since 1987.

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Williams sells olefins plant for $2.1B to focus on gas

Williams Partners has sold its 88.46% stake in the Geismar Olefins plant to Nova Chemicals for $2.1 billion in cash, as the pipeline giant tries to focus almost exclusively on natural gas. However, Williams Partners will get to keep the pipeline revenue stream, with Nova signing long-term supply and transportation agreements to provide feedstock to the Geismar, Louisiana, plant through its Bayou Ethane pipeline system.

“When the Williams Olefins transaction closes, we expect to be at 97% fee-based revenues driven largely by natural gas volumes,” said Alan Armstrong, CEO of Williams Partners’ general partner. Armstrong said the deal also allows Williams Partners to cut its exposure to commodity margins.

Williams Partners plans to use the cash to pay off its $850 million term loan and fund some of its capex projects. The partnership has planned to spend $2.1-2.8 billion in 2017 on growth projects, such as the 200-mile Atlantic Sunrise expansion, which would transport up to 1.7 Bcf/d of Marcellus gas into the Transco distribution system.

The combination of a sharper focus and an improved balance sheet was immediately welcomed by analysts. Fitch Ratings said it could increase Williams Partners’ credit rating from BBB- to BBB+ after the deal closes. Tudor Pickering Holt called the price “better than expected.” Citigroup upgraded its rating of Williams Partners and parent Williams Cos. from

“neutral” to “buy,” saying the shares had become “too inexpensive to ignore.”

NuStar enters Permian in $1.5B acquisition of NavigatorNuStar Energy will acquire Navigator Energy Services for $1.475 billion as

it finally gains a position in the Permian Basin. Following the deal announcement, NuStar priced an equity offering that is expected to raise $579 million.

Navigator owns and operates an array of assets in the Midland Basin including 500 miles of crude mainline transportation pipelines with 74,000 bbl/d, ship-or-pay

volume commitments and deliverability of 412,000 bbl/d. Also included in the deal is a pipeline gathering system with more than 200 connected producer tank batteries capable of more than

400,000 bbl/d of pumping capacity covering over 500,000 dedicated acres and 1.0 MMbbl of crude oil storage capacity with 440,000 bbl leased to third parties.

NuStar has 8,700 miles of pipeline and 95 MMbbl of storage capacity across the US, Canada, Mexico, the Netherlands and the UK, but the San Antonio-based company lacked operations in the red-hot play just 300 miles to the west.

“It’s been no secret that we’ve been actively searching for a way to break into the Permian Basin, which currently represents approximately 40% of all onshore US rig opportunity,” NuStar CEO and President Brad Barron said. “Navigator’s assets are in the core of the core of the country’s most prolific basin. Beyond that, these assets are well built and backed by solid fee-based customer contracts with a business model and approach that falls right in our wheelhouse.”

With NuStar’s Texas assets mostly focused on storage and terminals in the Eagle Ford shale play, there should be limited overlap from Navigator. Barron also said NuStar is planning “modest” future growth capex to build out the system including a connection of the Navigator system to NuStar’s Corpus Christi docks.

Some analysts were struck by the sale price, which came out as more than 20 times expected EBITDA in 2017, even though it was already the third billion-dollar midstream deal in the Permian this year—with a fourth, Blackstone Energy Partners’ acquisition of EagleClaw Midstream Ventures, announced just days later (PG. 12).

To help pay for the transaction, NuStar offered 12,500,000 common units for gross proceeds of approximately $579 million, with a 30-day greenshoe of up to 1,875,000 additional common units.

A&D

Public offerings of common and preferred units and 10-year senior notes will help pay for deal.

Continues On Pg 11

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The combined asset base is either already connected or could be connected with relative ease, creating significant synergies. For example, Pembina’s Redwater and

Empress facilities are key receipt points on Veresenʼs Alberta Ethane Gathering System (AWGS). AEGIS is also connected to

Pembina's Vantage Pipeline. Other assets include a joint interest in the 1.65 Bcf/d Alliance pipeline, which

flows from the WCSB to Chicago, and the Aux Sable facility with 2.1 Bcf/d processing and 131,500 bbl/d fractionation capacity.

Versen is currently expanding in the Montney in BC with the construction of 1.5 Bcf/d of gas processing and related compression, gathering and liquids handing under long-term, fee-based agreement. This complements Pembinʼs 1.7 Bcf/d of gas processing in the Deep Basin, Duvernay and Alberta Montney.

The deal would make Pembina more pipeline focused. The company currently gets 46% of its margins on pipelines. “When we combine with Veresen who is ... 68% pipelines, we put the P back in pipelines in our name,” Pembina CEO Michael Dilger said on a conference call. See more on this deal in the next issue.

Pembina acquiring Veresen in $7.1B deal Continued From Pg 1

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KMG buys maker of pipeline chemicals for $495MM

Specialty chemical producer KMG Chemicals will acquire Flowchem, which makes pipeline performance products, from PE firm Arsenal Capital Partners for $495 million. Flowchem is a global provider of drag-reducing agents (DRA), which reduce friction near the pipeline walls and within fluid flowing through the pipeline network.

Flowchem is the second-largest provider of DRAs, serving more than 50 pipeline operators globally. Based in Waller, near Houston, Flowchem sells DRAs for light, medium or heavy crude as well as DRAs engineered for refined fuel products and custom-engineered DRA solutions.

KMG Chairman and CEO Chris Fraser said Flowchem would be a good fit in its existing valve lubricants business. In addition to Flowchem being a profitable,

“well-managed” company, the DRA market has grown about 10% a year over the past six years and the market is estimated to grow 5-10% for the next 10 years, Fraser said.

Speaking to investors after the deal was announced, Fraser ticked off several reasons why the DRA market represents a good opportunity: DRA usage is affected by global oil demand, which is more stable than oil price; DRAs lower pumping-related electricity costs and industrial electricity costs are expected to keep rising; DRAs improve the efficiency of older pipelines and two-thirds of US crude pipelines are at least 30 years old; and a growing number of new pipelines are being designed for DRAs.

The purchase price of $495 million in cash, includes working capital of $17 million. The acquisition will be funded with financing provided by KeyBank National Association, HSBC Bank USA and HSBC Securities.

In February, KMG acquired Sealweld of Calgary, a global supplier of value and actuator maintenance products to pipeline companies. The purchase price was $17.4 million including estimated net working capital of $4.5 million.

Service & Supply The company also announced a public offering of preferred units at $25 per unit

without a disclosed proceeds estimate. NuStar also issued $550 million of 5.625% 10-year senior notes, which Barron said was oversubscribed. The company’s general partner, NuStar GP Holdings, has also agreed to waive up to $22 million in incentive distribution rights and common equity for 10 quarters after the acquisition agreement was signed.

UBS is lead bookrunner for the common units offering with Mizuho as joint bookrunner. Wells Fargo; Merrill Lynch; Pierce, Fenner & Smith; Morgan Stanley and UBS are acting as joint

bookrunners for the preferred offering. For the senior notes, Mizuho, Barclays, J.P. Morgan, MUFG, PNC Capital Markets, SunTrust Robinson Humphrey and US Bancorp Investments are bookrunners for the offering, and BBVA Securities, BNP Paribas Securities, Citigroup Global Markets, Comerica Securities, Scotia Capital (USA) and SMBC Nikko Securities America are acting as co-managers.

No recovery yet in Eagle Ford but ‘promising things’ seen— Volumes on NuStarʼs South Texas Crude Oil System and from Eagle Ford

customers continue to be below NuStar’s minimum volume commitments. “We’re optimistic that volumes will begin to bounce back later this year due to increased drilling activity in the area,” NuStar CFO Thomas Shoaf told investors in a quarterly conference call. Overall, throughput volumes on NuStar’s crude oil pipelines remain comparable to 1Q16, as throughput revenue rose 2.0% YOY to $121.2 million.

CEO Barron said “promising things” were seen in the Eagle Ford as nominations have begun increasing every month. Acquisitions of acreage have also helped, he said, most notably Sanchez Energy, whose JV purchased 318,000 operated acres in Dimmit and Webb counties in January. “They’re more active than Anadarko was,” he said. Anadarko still holds an Eagle Ford position but has focused instead on the Delaware and DJ basins.

NuStar enters Permian in $1.5B acquisition Continued From Pg 10

US Midstream Market Movers—Last 30 Days Source: CapIQ

Company Ticker $/Share 04/26/17

$/Share 03/27/17

% Change

% Change

YOY

Top

10

Southcross Energy Partners SXE $4.25 $3.12 36% 90%Sunoco SUN $31.00 $23.95 29% -15%Phillips 66 Partners PSXP $53.59 $49.87 7% -12%The Williams Companies WMB $30.78 $28.66 7% 54%Spectra Energy Partners SEP $45.24 $42.13 7% -9%Tesoro Logistics TLLP $55.34 $52.01 6% 18%EnLink Midstream ENLC $19.50 $18.55 5% 29%Buckeye Partners BPL $69.54 $66.24 5% -2%Shell Midstream Partners SHLX $32.68 $31.23 5% -12%EQT Midstream Partners EQM $78.87 $75.68 4% 2%

Bot

tom

10

Sprague Resources SRLP $25.15 $27.05 -7% 9%Plains All American Pipeline PAA $30.32 $31.25 -3% 29%Tallgrass Energy Partners TEP $51.53 $52.03 -1% 36%Kinder Morgan KMI $20.92 $21.03 -1% 14%Enbridge Energy Management EEQ $17.79 $17.80 0% -11%Global Partners GLP $18.80 $18.80 0% 34%Magellan Midstream Partners MMP $75.71 $75.55 0% 6%Targa Resources TRGP $57.04 $56.85 0% 41%Enable Midstream Partners ENBL $16.36 $16.26 1% 44%Rice Midstream Partners RMP $25.18 $24.91 1% 53%

Note: Includes public, US-based companies operating in the midstream space, limited to >$1.00/share and market cap >$500 million.

Demand for drag-reducing agents expected to rise 5-10% a year for a decade, KMG CEO said.

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Inter Pipeline issues $370MM in medium-term notes

Inter Pipeline Ltd issued $370 million (C$500 million) of senior unsecured medium-term notes in the Canadian public debt market this month. The Calgary-based company will use net proceeds to repay indebtedness under its revolving credit facility and for other general corporate purposes.

The notes have a fixed interest rate of 2.734%, payable semi-annually, and will mature on April 18, 2024. The notes were offered through a syndicate co-led by BMO Capital Markets, CIBC Capital Markets and TD Securities.

The company’s pipeline system transports 1.3 MMbbl/d and runs over 7,700 km. Inter Pipeline also processed 3 Bcf/d of NGL in 2016 and operates 16 petroleum and petrochemical storage terminals in Europe with a capacity of 27 MMbbl.

Blackstone spends $2.0B for Delaware operator EagleClawBlackstone Energy Partners has struck a deal to buy the the largest privately

held midstream operator in the Delaware Basin, EagleClaw Midstream Ventures, for $2.0 billion in cash. The company’s assets, in Reeves, Ward and Culberson counties, include more than 375 miles of natural gas gathering pipeline and 320 MMcf/d of

processing capacity with an additional 400 MMcf/d under construction. Operations at EagleClaw will continue largely as normal, with the

company keeping its name, leadership team and most of its employees. Blackstone will work with EagleClaw to spend more capital to expand the company’s footprint in the Delaware, EagleClaw CEO Bob Milam said.

The acquisition was the second billion-dollar Permian midstream deal in April with NuStar acquiring Navigator for $1.475 billion (PG. 10).

Previously backed by EnCap Flatrock Midstream, EagleClaw purchased the Permian assets of PennTex Midstream Partners, which included a 60 MMcf/d cryogenic processing plant in Reeves County, in August 2016 for an undisclosed sum. In December 2014, EagleClaw acquired more than 50 miles of gas gathering pipeline, the 15 MMcf/d refrigerated Joule-Thomson plant, a 60 MMcf/d cryogenic processing plant and seven new 1,700-horsepower compressors in Reeves County for $200 million from BHP Billiton.

Blackstone Group, one of the world’s leading investment companies, has been active in the Texas energy M&A space in recent months, most notably through a 50:50 JV with Sanchez Energy that bought Anadarko Petroleum’s interest in 318,000 gross acres in the Eagle Ford for $2.3 billion in January. The PE firm also devoted $1.0 billion to a JV with Jetta Operating to target Delaware assets and leaseholds as well as $500 million to Guidon Energy, which has bought $436 million worth of Midland Basin assets since August. Blackstone was in negotiations to buy a $5.0 billion stake in Energy Transfer Partners earlier in 2017, but backed out.

The EagleClaw transaction is already the fourth billion-dollar-plus midstream deal in the Permian Basin in 2017. In January, Plains All-American Pipeline bought the 515-mile Alpha Crude Connector gathering system in the Delaware for $1.215 billion, and Targa Resources bought Outrigger Energy’s Permian midstream assets including 80,000 bo/d of crude gathering capacity for $565 million plus up to another $935 million based on realized gross margin in 2018 and 2019.

A&D

Top 5 Midstream Deals YTD

Date Buyers Sellers

Deal Value ($MM) Deal Type Segment

05/01/17 Pembina Pipeline Veresen Inc. $4,280 Acquisition Integrated

04/17/17 The Blackstone Group

EagleClaw Midstream $2,000 Acquisition Gathering/

Processing

04/11/17 Nustar Energy Navigator Energy Services $1,475 Acquisition Integrated

01/24/17 Plains All American Pipeline

Concho Resources; Frontier Midstream $1,215 Acquisition Gathering/

Processing

01/23/17 Targa ResourcesOutrigger Energy; Silver Hill Energy Partners Holdings

$565 Acquisition Gathering/Processing

Note: Based on deals with disclosed values. Source: PLS Global M&A Database

EagleClaw to see few changes, but footprint expansion expected.

■ TSSP completed a structured investment in Trinity Midstream through a joint venture with Trinity CO2. Trinity Midstream owns a 185-mile pipeline network that delivers CO2 to enhanced oil recovery operations in the Permian Basin as well as CO2 reserves. Trinity CO2 will become a transportation and supply customer of Trinity Midstream. Financial terms were not disclosed. Wells Fargo acted as sole financial adviser and Vinson & Elkins acted as legal adviser to Trinity CO2 in this transaction. Bracewell acted as legal adviser to TSSP, an investment firm affiliated with TPG Holdings.

■ Centurion Midstream Group has acquired Remuda Energy Transportation from Agave Energy Holdings, a subsidiary of Lucid Energy Group. Remuda is a crude oil trucking company in the upper Delaware Basin, whose purchase of Centurion complements its Permian Basin crude transport business. Financial terms were not disclosed.

Finance

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NextDecade aims to be a public firm worth $1.0B

NextDecade will become a publicly listed company valued at more than $1.0 billion under a definitive agreement

signed with Harmony Merger Corp. The board of directors of both NextDecade, an LNG

development company, and Harmony, a special purpose acquisition company, have agreed to the reverse merger.

Assuming no redemptions by Harmony stockholders, the all-stock transaction is expected to yield a combined entity with a pro forma enterprise value of more than $1.0 billion at closing. An additional $200 million of contingent stock consideration will be paid to NextDecade’s members upon the achievement of certain milestones. Current Harmony stockholders will own approximately 13.0% of the combined company.

NextDecade has applied for FERC approval for its first proposed LNG export facility, the Rio Grande LNG project located in Brownsville, along with the associated Rio Bravo pipeline originating in the Agua Dulce market near Corpus Christi, Texas. It has also signed agreements with Texas City to build another LNG export terminal there.

The companies signed an LOI to pursue a merger last month. The proposed merger is expected to close late in Q2. Funds managed by York Capital Management, Valinor Management, and Halcyon Capital Management own a majority interest in NextDecade. For the purposes of this transaction, Harmony is represented by Graubard Miller and NextDecade is represented by King & Spalding. Height Securities is acting as financial advisor to NextDecade. York Capital Management, Valinor Management and Halcyon Capital Management are represented by Weil Gotshal & Manges.

Finance

Antero Midstream GP announces plans for $1.1B IPOAntero Midstream GP LP (AMGP) is going public, with an initial public offering

that could raise $1.0 billion while bucking the current trend of midstream rollups. AMGP will own the incentive distribution rights to Antero Midstream Partners LP (AM), a natural gas pipeline player in the Utica and Marcellus shale.

The IPO will offer 37,250,000 common shares representing limited partner

interests in AMGP at an anticipated initial public offering price of $22-$25 per common share, according to an SEC filing. The underwriters will be granted a 30-day greenshoe of up to an additional 5,587,500 common shares. If the IPO goes through at the top of the price range and the greenshoe is fully exercised, proceeds would reach $1.07 billion.

The common shares would represent a 20% limited partner interest in AMGP, rising to 23% upon use of the greenshoe, Antero Resources Investment will own the remainder. In connection with the offering, Antero Resources Midstream Management LLC will be converted into a Delaware limited partnership, changing

its name to Antero Midstream GP LP.AM’s infrastructure assets include

307 miles in gathering pipelines, 1.1Bcf/d in compression capacity, a 200 MMcf/d

processing plant and a 20,000 bbl/d fractionation plant. It also formed joint venture with MPLX in February that could construct up to 11 new 200 MMcf/d processing plants. MPLX would operate all JV processing assets, and Antero Resources would be the anchor producer.

The IPO comes at a time when other midstream companies are rolling up their partnerships. ONEOK is in the process of acquiring all of the shares of ONEOK Partners in a $17.2 billion deal, and Williams announced in January it was changing its relationship with Williams Partners in an $11.4 billion transaction.

Morgan Stanley, Barclays and JP Morgan will act as joint bookrunning managers for the IPO. Baird, Citigroup, Goldman Sachs and Wells Fargo will act as bookrunning managers.

ONEOK gets $2.5B facility for post-merger borrowingONEOK has negotiated a new $2.5 billion, five-year senior unsecured revolving

credit facility, which will be available upon the merger of ONEOK and ONEOK Partners. The new credit facility will replace the existing $300 million facility of

ONEOK and the $2.4 billion facility of ONEOK Partners.The general partner currently owns 41.7% of ONEOK Partners and

plans to acquire the remainder of the outstanding common units this quarter. The $17.2 billion rollup is expected to result in lower cost of capital, improved cash flow and reduced taxes.

ONEOK has an option to request an increase to the facility to $3.5 billion and two one-year extensions. A syndicate of 22 banks led by Citibank, Bank of America, Barclays Bank, JPMorgan Chase Bank, Mizuho Bank, Morgan Stanley and Wells Fargo committed to ONEOK’s new facility.

NextDecade plans to export LNG from two facilities.

March 14, 2017 • Volume 10, No. 03

MidstreamintelligenceServing the marketplace with news, analysis and business opportunities


Trio proposes new 730-mile Epic pipeline from the PermianA new 730-mile pipeline could be coming to the Permian Basin. The Epic pipeline

will be able to send 440,000 bbl/d to Corpus Christi, Texas, starting in 1Q19. Planning the Epic will be Castleton Commodities International, which made a $1.0 billion

acquisition in East Texas a few months ago, San Antonio-based TexStar Midstream Logistics and Dallas-based Ironwood

Midstream Energy.The project includes at least four receipt points for crude oil and condensate in

Texas including Orla, Pecos, Crane and Midland, which it will transport crude to the drop-off points in the Port of Corpus Christi area including an affiliate’s terminal.

The first open season for the 16-, 20-, 24- and 30-in. pipeline will continue until April 15, and offer commitments for 200,000 bbl/d of the planned capacity. The expected cost of the pipeline was not disclosed.

Welcome to the revamped Midstream Intelligence

“Midstream News” has become “Midstream Intelligence.” The new name is more than a name change. We will focus the report more on the North American midstream industry. We've redone the layout and added new elements. You will see a list of ongoing construction projects (PG. 2), an expanded Midstream Market Movers table (PG. 12), a tracking of North American LNG projects and the Alerian MLP Index (PG. 17). We greatly value your feedback. Please pass any comments to [email protected].

Here's what you have to look forward to in this issue. In pipeline news, Castleton, TexStar and Ironwood announced plans to build a 730-mile 400,000 bbl/d oil pipeline from the Permian Basin to Corpus Christi (PG. 1). The open season will commence April 15. Speaking of open seasons, Enable Midstream kicked off a non-binding open season for projects that could add 600 MMcf/d of throughput to western and southeast markets for Anadarko Basin producers (PG. 3). Other top stories include WhiteWater Midstream beginning construction of the Agua Blanca line in the Delaware Basin (PG. 3), TransCanada cut tolls 46% on its Canadian Mainline (PG. 4) and Dakota Access startup is imminent (PG. 5).

In "Gas Processing" Canyon Midstream is expanding capacity in the STACK (PG. 3), Sendero is building in the Permian (PG. 11), and Lone Star is adding a fractionator at Mont Bevieu (PG. 11). In Canada, Veresen announced a new project for a $715 million processing complex in the Montney (PG. 10).

A&D activity was highlighted by Marathon's $2.0 billion dropdown to MPLX, the closing of the Enbridge/Spectra deal (PG. 9), Pembina's multi-billion Duvernay buy (PG. 9), and Matador's Delaware JV. (PG. 9).

See PG. 13 for 2016 earnings.

IN THIS ISSUE

Castleton bought $1.0B in East Texas acreage from Anadarko in November.

LNG Supply Expected 2017-2020 From FID Projects

0

30

60

90

120

150

0

2

4

6

Australia Pacific T1Australia Pacific T2GladstoneSabine Pass T1GorgonM

alaysia LNG T9

Petronas FLNG 1

Sabine PassT2Gorgon T2Gorgon T3Ichthys T1Sabine Pass T3Sengkang LN

GW

heatstone T1Cam

eron LNG T1

Cameroon GoFLN

GCove Point T1Ichthys T2Prelude FLN

GSabine Pass T4W

heatstone T2Elba IslandYam

al T1Cam

eron T2Cam

eron T3Corpus Chris� T1Freeport T1Freeport T2Sabine Pass T5Yam

al T2Corpus Chris� T2Freeport Train T3Yam

al T3Tangguh T3Petronas FLN

G 2

Mill

ion

tonn

es p

er a

nnum

2016 2017 2018 2019 2020 Cumula�ve (Right hand axis)§ ~146 million tons per annum of new FID’d liquefac�on produc�on coming online 2016-20§ All LNG facili�es due to start up in 2016 came online during the year

New LNG Supply By Project Start Date2016 Facili�es

Opera�onal 2017 Progress

Mill

ion

tonn

es p

er a

nnum

Source: GasLog Partners Presentation via PLS docFinder www.plsx.com/finder

Continues On Pg 6

Continues On Pg 16

Marathon receives $2.0B in opening asset dropdown to MPLXMarathon Petroleum's plan to dropdown assets to its MPLX MLP got underway

in force with a $2.015 billion deal, with much larger dropdowns expected this year. In exchange for the assets, MPLX is sending to Marathon $504 million in equity and

$1.511 billion in cash. The assets are expected to raise $250 million in EBITDA in 2017.

MPLX is picking up 62 light-product terminals with 24.0 MMbbl of capacity; 73 tanks with 7.8 MMbbl of capacity; a crude oil truck unloading facility at Marathon's refinery in Canton, Ohio; and eight natural gas liquids storage caverns in Woodhaven, Mich., with approximately 1.8 MMbbl of capacity. The dropdown also included 604 miles of pipeline over 11 systems.

MPLX recently issued $2.25 billion in unsecured senior notes, which it said help fund the acquisitions.

Marathon still exploring possible dropdown of Speedway assets.

For more LNG see our LNG section on PG. 15-20.

ONEOK Partners becomes 1 with ONEOK in $17B roll-up.

MidstreamIntelligence Feb. 17

IPO would give Antero Midstream GP a market value of $5 billion.

Antero Midstream LP entered a Marcellus and Utica fractionation and processing JV with MPLX in February.

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Fairway opens 7.5 MMbbl in salt dome storage in Houston

Fairway Energy Partners has begun initial commercial operations at its new crude oil storage facility, turning three existing underground storage caverns at the Pierce Junction Salt Dome in south Houston into 7.5 MMbbl of crude storage. The company also constructed brine bonds with 6.5 MMbbl of capacity.

The Houston company began construction in 2015 to convert the caverns and to building out the supporting infrastructure including two bi-directional, 24-in. pipelines connecting the caverns to the Genoa Junction and Speed Junction hubs. The facility is the only independent salt dome crude oil storage terminal in the greater Houston market area.

The facility’s initial operating capacity is 70% subscribed, and Fairway is planning on further expansions. The next phase will increase physical storage capacity by 2.6 MMbbl with a similar-size expansion to brine pond capacity. Construction for Phase 1B is to begin in H2.

Change in Lower 48 Natural Gas Storage

-350

-300

-250

-200

-150

-100

-50

0

50

100

150

200

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

5 Yr Range5 Yr Avg

20162017

Source: OTC Global Holdings Market Data and EIA

Current US Petroleum Stocks by Type (MMbbl) For Weeks Ending

04/21/17 04/14/17 Net Change 04/22/16

Crude Oil (Excluding SPR) 528.7 532.3 -3.60 509.3

Motor Gasoline 241 237.7 3.30 241.3

Distillate Fuel Oil* 150.9 148.3 2.60 158.2

All Other Oils 417 412.8 4.20 428.6

Crude Oil in SPR 690.8 691.3 -0.50 695.1

Total 2,028.4 2,022.4 6.00 2,032.5

*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)

04/21/17 04/14/17Net

Change 04/21/16

% Change

YOY

% Diff. From

5-Yr Avg.

East 303 278 25 428 -29.2% -14.9%

Midwest 504 487 17 552 -8.7% 30.2%

Mountain 149 144 5 155 -3.9% 22.1%

Pacific 228 223 5 276 -17.4% -6.2%

South Central 1,005 983 22 1,136 -11.5% 28.4%

Total Lower 48 2,189 2,115 74 2,547 -14.1% 15.8%

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.

The EIA reported a 74 Bcf injection for the week ended April 21. Total gas in storge in the US stands at 2.189 Tcf, 14.1% below this time last year but 15.8% above the 5-year average.

Storage

MidstreamIntelligence is published every three weeks by PLS Inc.

PLS Midstream News covers the midstream and LNG sectors with news and analysis. Topics include gathering, marketing, pipelines, mergers, acquisitions and capital financing.

To obtain additional PLS product details, drill www.plsx.com/publications.

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To obtain additional listing info, contact us at 713-650-1212 or [email protected] with the listing code. Only clients are able to receive additional information. To become a client call 713-650-1212.

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Any means of unauthorized reproduction is prohibited by federal law and imposes fines up to $100,000 for violations.

ABOUT PLS

http://www.eia.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html

http://www.eia.gov/naturalgas/weekly/



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Qatar retains title as largest global LNG supplier With exports of 77.3 mtpa in YE16, Qatar remains the world’s leading LNG

exporter, representing 29.9% of global LNG trade. Australia is second with a 17.2% share but is expected to surpass Qatar in 2018 as a wave of new projects and trains come online with capacity expected to grow to 85 mtpa next year, up from 43.7 mtpa in 2016.

For the time being, LNG exporters are struggling through a glut. Global trade of LNG reached 258 mtpa in 2016, a record and an increase of 13.1 mtpa from 2015. However, global liquefaction capacity for 2016 was already 340 mpta.

The 2016 increase in capacity also exceeded the increase in demand with another 35 mtpa coming online with the debut of Cheniere’s Sabine Pass LNG, Chevron’s Gorgon LNG, Origin/ConocoPhillips/Sinopec’s Australia Pacific LNG and Petronas’ Malaysia LNG; new trains at Santos’ Gladstone LNG and Shell’s Queensland Curtis LNG.

While the US ended 2016 representing just 1.1% of global exports, the gap will close with 57.6 mtpa under construction. With abundant gas resources from shale and a friendly presidential administration, the US could be the one to watch to fill the expected gap in demand.

The current LNG oversupply could damage enthusiasm for some projects. Shell has postponed its final investment decision for its 5.5 mtpa Lake Charles LNG project. Sempra Energy had to delay its FID for the Cameron LNG near Lake Charles, La.,

after a partner refused to commit further capital. The three major producers in the North Shore of Alaska have all backed out of the Alaska LNG project, leaving

the state to go it alone as it seeks Federal Energy Regulatory Commission approval of the project.

Some other companies continue to focus on the future and press ahead. Tellurian’s 26 mtpa Driftwood LNG is waiting for regulatory approval and is still a year away from its FID. Undeterred by the delay at Cameron LNG, Sempra has applied with the FERC for a 13.5 mtpa facility in Port Arthur, Texas.

LNG

Australia’s export capacity to grow from 43.7 mtpa in 2016 to 85 mtpa in 2018.

While the LNG glut is expected to ease, current economics causing delays to FIDs in US LNG projects.

LNG Export Terminal Permitting StatusImport TerminalsApproved -Under Construction -FERC

Corpus Christi, TX: 0.4 Bcf/d (Cheniere –Corpus Christi LNG)

Approved - Not Under Construction -FERC

Salinas, PR: 0.6 Bcf/d (Aguirre Offshore GasPort, LLC)

Approved - Not Under Construction -MARAD/Coast Guard

Gulf of Mexico: 1.0 Bcf/d (Main Pass McMoRanExp.)

Gulf of Mexico: 1.4 Bcf/d (TORP Technology-Bienville LNG)

Export TerminalsApproved -Under Construction -FERC

Corpus Christi, TX: 2.14 Bcf/d (Cheniere –Corpus Christi LNG)

Cove Point, MD: 0.82 Bcf/d (Domin-ion–Cove Point LNG)

Elba Island, GA: 0.35 Bcf/d (Southern LNG Company)

Freeport, TX: 2.14 Bcf/d (Freeport LNG Dev/Freeport LNG Expansion/FLNG Liquefaction)

Hackberry, LA: 2.10 Bcf/d (Sempra– Cameron LNG)

Sabine Pass, LA: 1.40 Bcf/d (Sabine Pass Liquefaction)

Sabine, LA: 1.40 Bcf/d (Cheniere/Sa-bine Pass LNG)

Approved - Not Under Construction -FERC

Hackberry, LA: 1.41 Bcf/d (Sempra -Cameron LNG)

Lake Charles, LA: 1.08 Bcf/d (Magnolia LNG)

Lake Charles, LA: 2.2 Bcf/d (Southern Union–Lake Charles LNG)

Sabine Pass, TX: 2.1 Bcf/d (ExxonMobil –Golden Pass)

Approved - Not Under Construction - Canada

Port Hawkesbury, NS: 0.5 Bcf/d (Bear Head LNG)

Kitimat, BC: 3.23 Bcf/d (LNG Canada)

Squamish, BC: 0.29 Bcf/d (WoodfibreLNG Ltd)

Prince Rupert Island, BC: 2.74 Bcf/d (Pacific Northwest LNG)

Source: AIMS LLC, aimsllc.biz

US LNG Exports Could Fill Coming Gap

Source: Cheniere Energy investor presentations and Wood Mackenzie estimates.

v ~42 new LNG trains needed to take FID by 2025 to meet forecasted demand through 2030

v Supply-demand gap projected to open shortly after 2020 as trade grows and existing production declines in certain regions

v LNG demand expected to grow significantly from 2015 to 2030

mtp

a

500

400

300

200

100

02000 2005 2010 2015 2020 2025 2030

2015 to 2030 CAGR = 4.8%

Supply: Existing and under construction

New supply~180 mtpa

LNG trade forecasts

Source: Petrie Partners March 2 Presentation via PLS docFinder www.plsx.com/finder

http://www.plsx.com

http://www.plsx.com/finder/viewer.aspx?q=&f=src.1668&v=0&doc=62347&slide=1697341 - doc=62347&slide=1697351&



■ Dave Duckett has retired as CEO of Plains Midstream Canada (PMC), a wholly owned subsidiary of Plains All American Pipeline. Duckett joined PAA in 2001 as EVP of PMC, was president from 2003-2015 and become CEO in 2015. Jason Balasch was promoted to president. Balasch most recently was EVP of NGL commercial and facilities. Phil Kramer has also retired as EVP. Other retirements were Jim Fryfogle as VP, bulk supply and logistics; Rick Jensen as PMC EVP, operations; and David Craig as PMC SVP, corporate development. PAA also announced the promotions of Jeremy Goebel to SVP, acquisition and strategic planning, and Roy Lamoreaux to VP, investor relations and communications.

■ Apache Corp. has appointed Brian W. Freed as SVP, Midstream and Marketing and Robert W. (“Bob”) Bourne as VP, Business Development – Midstream and Marketing. Freed will oversee of all of Apache’s midstream and marketing strategies and activities. Bourne will be responsible for generating and developing new business opportunities for Apache’s Alpine High discovery. Freed was VP of commercial operations at Crestwood Equity Partners LP. His experience includes serving as SVP of business development for American Midstream Partners from 2014-2015.

■ John C. Mollenkopf has been appointed to the board of directors of Antero Midstream Partners GP, the general partner of Antero Midstream Partners LP. Mollenkopf retired from MPLX in October 2016. He previously served MPLX as EVP and COO, MarkWest operations, from December 2015 through September 2016 following the merger of MPLX and MarkWest Energy Partners.

■ The Texas Senate has approved the nomination of Energy Transfer Partners CEO Kelcy Warren to the Texas Parks & Wildlife Commission. Environmentalists fought the nomination, angered by ETP projects such as Dakota Access and the Trans-Pecos pipelines.

People

Alaska LNG applies with FERC even after companies bail outAlaska is pressing ahead with the Alaska LNG export project on the Kenai

Peninsula even though all of the state’s major oil companies have bailed on the effort. The Alaska Gasline Development Corp. has applied for the $40-45 billion pipeline

and export project with the Federal Energy Regulatory Commission. The project would build a 3.5 Bcf/d natural gas processing plant

in Prudhoe Bay, ship the gas 800 miles through a 41-in., 3.1 Bcf/d pipeline to an 20 mtpa LNG export terminal at Kenai in southern Alaska, from which the LNG would go to Asian customers.

The effort is seen as a critical venture for North Slope natural gas reserves. However, lower gas prices and concerns of an oversupply for LNG prompted ExxonMobil, ConocoPhillips and BP to drop out of the project.

Still, the state’s leader in particular remains undaunted. Alaska Gov. Bill Walker has used officials’ refueling stops in Alaska to promote the project to Chinese President Xi Jinping and Vice President Mike Pence, and he intends to meet with top Japanese officials in an upcoming trip.

By submitting the FERC application now, Alaska hopes to keep schedule for a draft environmental impact statement in 2Q18, a final EIS by YE18, an FID in early 2019 and first LNG about 2026. Some energy analysts are skeptical about this timeline.

“This will be the largest and most complicated EIS that FERC has done,” Larry Persily, former head of the federal Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects, told E&E News. “So common sense says it’s not going to go quicker than anyone expects. It probably will go slower.”

Golden Pass LNG gets non-FTA export authorityThe Golden Pass LNG terminal has received permission to export LNG to countries

with which the US has not signed a free-trade agreement. The US Department of Energy gave the Texas Gulf Coast facility non-FTA authority to export the equivalent of 2.21 Bcf/d.

The LNG terminal near Port Arthur was completed in 2010, but it was designed to import LNG. The abundance of natural gas resources in the US caused the facility’s owners, a JV of Qatar Petroleum (70%), ExxonMobil

(17.6% WI) and ConocoPhillips (12.4%) to change its purpose. The $10 billion plan for an export terminal includes 2.6 miles of 24-in. pipeline,

three new compressor stations and interconnections for bidirectional flow to provide feed gas. No in-service date has been released, and a FID has not been announced.

LNG

Alaska's goverrnor has wrtten about the project to President Trump.

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A unique tool for monitoring global activity by country, project, etc.Call 713-650-1212, or email [email protected]. wire.plsx.com

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