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Analyst Meeting June 22, 2012.

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Presentation on theme: "Analyst Meeting June 22, 2012."— Presentation transcript:

1 Analyst Meeting June 22, 2012

2 Senior Management Representatives
NGL Energy Partners, LP Mike Krimbill Chief Executive Officer & President Craig Jones Chief Financial Officer Atanas Atanasov Vice President & Treasurer High Sierra Energy, LP Jim Burke Chairman & Chief Executive Officer Nick Aretakis Chief Financial Officer David Kehoe Chief Operating Officer

3 Forward Looking Statements
This presentation may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. An extensive list of factors that can affect future results are discussed in the Partnership’s Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

4 Pro Forma Geographic Footprint
Following the merger with High Sierra, NGL has a significant presence in the most prolific oil and natural gas shale plays in the country

5 Business Strategy MLP Equity Value Steady distribution growth to maximize unit holder return Enhance access to equity markets Projected to be 12-15% annually Strong common unit coverage Focused Growth Increase volumes for all segments in existing markets Expansion of services in new high growth basins / shale plays Pursue organic growth at low multiples, targeting +25% ROR Accretive acquisitions at attractive multiples EBITDA and DCF Stability / Predictability Emphasis on repeatable cash flows Target Retail pre-sales and customer deposits Ownership of assets / infrastructure Minimize commodity price risk through back-to-back transactions and hedging Speaker: David Note: Okay to spend time on this slide Mention that leverage reduces steadily through the projected period Key point on minimum/measured commodity risk: we do not speculate, we do not want commodity price risk Mention that we will keep a sharp eye on liquidity Financial Maintain a conservative capital structure and low leverage Target Total Debt / EBITDA of 3.0x – 3.5x Maintain sufficient liquidity to provide for existing and future requirements Continue to improve access to debt and equity markets, positioning for investment grade rating

6 Key Strengths Speaker: David
Strategically Located Assets Assets located in some of the most prolific natural gas and crude oil plays in the country Eagle Ford, Bakken, Niobrara and Marcellus shales Granite Wash, Wattenberg Field, Mississippian Lime, Pinedale Anticline and Jonah Fields Substantial NGL storage and terminals Emphasize asset ownership so able to capitalize on opportunities Large rail car fleet cars Leading Service Provider with Significant Logistics Expertise Leading crude oil and condensate gatherer, transporter and marketer in the Midcontinent region Leading provider of NGL transportation services nationwide by railcar with an in-house dedicated logistics team Leading private terminal operator in the U.S. Sixth largest propane retailer Leading provider of water disposal and water recycling in the Rockies Geographically Diverse and Multiple Segments Reduces Risk Coast to Coast Retail operations and Terminal locations Four segments providing significant and diverse cash flows Scalable Business Model Water recycling technology can be implemented quickly at new facilities / locations Crude Oil Segment has grown from start-up to national presence through acquisition and organic growth Ability to add additional rail cars with low incremental expense Bolt-on retail assets to existing operations Experienced Management Team and Strong Private Equity Support Senior management team has an average of 30 years of industry experience Proven record of acquiring, operating and growing successful businesses Extensive integration experience Retail Tank Ownership Company owned tanks approximately 90% Conservative Balance Sheet Leverage at approximately 3.0x Significant Excess DCF to reduce debt and fund growth Significant borrowing capacity available Speaker: David Note – OK to spend time on this slide, but have targeted items to flag Start slide off noting that we will go into more detail in segment descriptions but on this slide and next slide we want to give overview of what we consider to be the key strengths and strategies that will give you a frame of reference as we talk more about the businesses Focus on items that address downside protection for debt holders Regarding stable cash flow point – might be worth speaking to volume stability from (i) contracts (in water, minimum volume and/or acreage dedication) and (ii) long customer and supplier relationships

7 Focus on Stable Cash Flows
Fee-Based EBITDA includes water segment revenues and terminal fees Water Segment A fee is charged on every barrel of water handled Terminal Throughput A fee is charged on each gallon moving thru the terminals Margin-Based EBITDA includes the Crude Oil and NGL Logistic segments as well as Retail Propane Margins for Crude Oil and NGLs are derived from purchase and sale transactions on a back-to-back basis Retail cost plus margin Volume stability and growth resulting from physical assets, long-standing customer and supplier relationships, and a focus on employee expertise / service Cost Plus EBITDA includes Wholesale Supply and Marketing and Pre-Sold Gallons Price to customer determined from cost of product plus storage, transportation, financing charge and margin Speaker: David Talking Points: Intro – want to talk about stability of cash flows in our business. Explain walk through of chart first, then explain Significant and growing fee-based business Long-term contracts at Water Segment – minimum volume and acreage dedication Fee charged for every barrel in the door Majority of water is from producing wells rather than new drilling activity Growth is driven by organic volume growth at Anticline and Marcum and new facilities and new technology at Marcum The business that is not fee-based is operated to drive consistency and growth (hedging, cost relationships) and is conservatively modelled in forecast Margins not dependent on crude prices or NGL prices Oil recovery EBITDA benefits indirectly from the same strong contracts we described for our water segment ebitda

8 Successful Acquisition and IPO Record
NGLEP has successfully acquired and integrated numerous companies and businesses over time Scalable business model with significant room for organic growth October 2011 Acquires January 2012 Acquires April 2012 Acquires June 2012 Merger October 2010 Combines Osterman Propane, one of Pacer Propane, one of largest Proflame and Global With High Sierra NGL Supply and Hicks Gas largest independents in US independents on west coast Propane Energy May 2011 Completes November 2011 Acquires February 2012 Acquires May 2012 Acquires $84 million IPO SemStream , LP North American Propane; folds Downeast Energy 12 terminals into Osterman Propane 431 railcars 3 million barrels of leased Speaker: Mark Talking Points: Been active in raising equity necessary to fund growth plans and capex including recent $10 million raise to fund Marcum acquisition. Demonstrates continued access to capital from private equity Exciting point in company lifecycle Consolidated previously developed and acquired crude businesses into one Crude Oil Segment (2009) Talk to prior success in both acquisitions and organic growth: Anticline, Crude underground storage

9 Pro Forma Adjusted EBITDA - $42.1mm
Water Services Pro Forma Adjusted EBITDA - $42.1mm

10 Water Services Overview
Anticline (Wyoming) Overview Treatment of oil and gas waste-water for recycling, clean water discharge, or disposal using a multi-patented process technology DJ Basin (Colorado) Overview Leading provider of oil and gas waste- water disposal services Recycling plants to sell water back to producers Mississippian Overview Water hauling and frac tank rental for third parties Assets include: 1 treatment & recycling plant in Wyoming 60,000bbls / day of recycling capacity 20,000bbls / day of discharge capacity 19 miles of pipeline for delivery of recycled water back to the field 1 deep injection well 3.5 MM bbls of water storage capacity Assets include: 7 water disposal facilities with 8 deep injection wells ~ 50,000bbls / day of current aggregate capacity First recycling plant added to existing disposal facility 2nd recycling plant completed, pending final permitting Assets include: 50 owned tractor/trailers in service for hauling water in Kansas and Oklahoma 65 frac tanks Misc associated equipment for use in the completion and operation of wells Speaker: David Talking points: Anticline, Wyoming: Explain clean water discharge & importance of this given regulatory environment Marcum in Colorado: Most recent acquisition. Each disposal facility includes a receiving station, storage, and pumping equipment Large volume capacity for treatment, recycling and discharge / disposal Long-term, deliver-or-pay contracts and acreage dedication contracts Nicholas – KS + OK: Mississipian Lime Play

11 Water Services Overview (cont’d)
Demonstrated history of growing water volumes Water Segment operations are strategically located in prolific oil and gas plays with established production profiles and strong expectations for future drilling in crude oil shales Anticline in Wyoming: Pinedale Anticline: Large base of active wells. As of March 31, 2012, there were ~1,990 wells producing 53,400 bbls of water per day(1) Planned expansion into Jonah field: As of March 31, 2012, there were ~1,725 wells producing 11,100 bbls of water per day(1) DJ Basin in Colorado: Wattenberg Field: ~21,900 active wells as of March 31, 2012 and an increasing number of wells being permitted each year(1) Niobrara Shale: Significant recent horizontal drilling demonstrating promising results in Niobrara Nicholas in Midcontinent: Multiple conventional reservoirs with long-term producing assets Emerging Mississippian Lime and Granite Wash plays Anticline Water Volumes DJ Basin Water Volumes Speaker: David Talking points Strong focus on this slide regarding demonstrated history of stable and growing water volumes Marcum incoming volume has grown at a CAGR of 13.5% from 2008 through LTM 6/30/2011 Note that oil recovery has seasonality but is generally in the range of 1.5% to 3.0%. Modeling is consistent at 1.8% Note that oil recovery at Marcum is expected ramp up in 4Q2011 following completion of installation of new technology (currently underway) and discuss reasons for why oil cut declined recently Recovering – speak to new technology that enhances recovery rates versus prior owners (1) Source: HPDI

12 Anticline Water Segment
Located in Pinedale, Wyoming, and sources water from wells in the Pinedale Anticline and Jonah natural gas fields Leading provider of treating, recycling, discharge and disposal services for oil and gas produced and frac flow back waste-water Consists of two water treatment plants - a recycling plant and a discharge plant Currently approximately 75% of water received is treated and redelivered back to the field, primarily through HSE’s nineteen mile pipeline system, with the remainder delivered by trucks Remaining 25% of received water is further treated to “ultra-clean” standards and discharged into the river Stable revenues generated from minimum volume deliver-or-pay contracts whereby customers are charged a fixed fee per barrel Successful growth story since 2006 Planned Expansion of pipeline for growth up to 25,000 barrels per day Strategic location and large, independent E&P clients Significant competitive advantages and growth opportunities Speaker: David Talking Points: Mention importance of Anticline – spending time on Marcum because its new and a big source of growth, but Anticline has been heavily built out and provides consistent revenues Mention discharge into the river, talk to being part of the solution, environmentally friendly, great relationship with regulators, etc… Talk about rebate concept Stable, proven, invested capital in getting set up and now can leverage technology at Marcum As of 2009, the Pinedale Anticline field contains prolific gas producing geologic structures that account for approximately 5% of current domestic natural gas production (among the top five largest natural gas fields in the U.S.)

13 Anticline Water Segment
Anticline Assets Area Map The Anticline Water Segment assets are strategically located in the core of the Pinedale Anticline, one of the top 5 largest natural gas fields in the US (1) Wyoming Sublette County Significant Fee-Based Cash Flow Pinedale Water Assets Per barrel fees paid by the E&P companies to treat, clean and either dispose of the water associated with their drilling and production or recycle it and bring it back to the field for reuse in drilling operations Over 90% of the volumes being processed at the Anticline facility come from deliver-or-pay contracts whereby customers are charged a fixed fee per barrel of water These contracts are with the top E&P companies in the Pinedale Pinedale Jonah _____________________ Source: US Energy Information Administration.

14 Anticline Water Segment
Critical Service Offering in the Anticline Competitive Advantage There are over 1,990 active wells producing 53,400 barrels per day of waste water in the Pinedale Anticline Wells drilled in the area utilize hydraulic fracking, which require 1- 3 million gallons of water per well, increasing the amount of waste water being generated in the area HSE’s services are critical in the Pinedale Anticline as a result of a strong emphasis on the part of E&P companies to safely dispose of this water and to reuse as much of it as possible The top 3 operators in the Pinedale formed an alliance with the BLM (1) to ensure responsible development in the Pinedale, with particular emphasis on water usage and disposal Specifically, the E&P companies have 2 critical concerns: Ensuring that the water both used and produced during the drilling process does not impact underground drinking water sources or wildlife habitats The ability to access water for drilling operations in an efficient, cost effective way through recycling and re-use Only full scale commercial water recycling and treatment facility in the Pinedale capable of handling the water needs of the producers in the area Pinedale region has limited private land availability for any potential competing facilities of size Geology in the area is not conducive to disposal wells Approximately 90% of volumes are deliver or pay contracts Primary Growth Opportunities Expansion of operations from the Pinedale down into the Jonah and emerging fields to the southwest of the Jonah As one moves southwest, the gas becomes richer The Pinedale averages 1,050 BTU gas The Jonah averages 1,150 BTU gas _____________________ Bureau of Land Management. Of the approximately 200,000 acres in the Pinedale, an estimated150,000 belong to the BLM. The majority of the mineral leases in the Pinedale underlie BLM surface land.

15 DJ Basin (incl. Niobrara) Water Segment
Seven water disposal facilities located in the Wattenberg Field in the Denver-Julesburg Basin Current combined capacity of approximately 50,000 bbls / day Each facility has a receiving station, storage and pumping equipment and at least one 9,000 – 10,000 ft. deep injection well High producer demand for water services – facilities running at near capacity Estimates that HSWS disposes of approximately 80% of all produced water generated in and around Weld County, including 90% of all produced water sent to third party commercial disposal facilities Diverse revenue streams Per barrel water disposal fee charged to receive, process and dispose water in deep injection wells Resale of recycled water Contracts with Top Producers Over 100 customers with over 90% of volumes under long-term contracts Contracted with acreage dedications with a 4-year average remaining life Currently negotiating long-term minimum volume or acreage dedication contracts with additional producers in the basin Substantial Growth Opportunities Two additional disposal wells in 2012 and one new facility with planned completion in 2013 Significant additional growth expected from horizontal drilling in the Niobrara shale Additional recycling facilities planned Speaker: David Talking Points: Assets in backyard / in middle of existing footprint Drilling prospects in Wattenberg & Niobrara Mention supply/demand imbalance in DJ basin, cost savings for producers by using Marcum vs. sourcing water in Greely Importance of recycled water revenues as % of water segment revenues in out years Improvement in oil cut expected from addition of recycling technology at Marcum (1) Source: HPDI

16 DJ Basin Water Segment Niobrara Shale DJ Basin Assets Area Map
Assets are strategically located in the core of the DJ Basin - the Wattenberg Field in Weld County, CO Wyoming Significant Fee-Based Cash Flow Niobrara Water Assets Per barrel fee paid by E&P companies to receive, process and dispose of waste water into deep injection wells Also earn a fees for recycling water and delivering it back to the producers for reuse in drilling operations Given the high demand for water in the area and increased difficulty in sourcing new water, recycling is a key area of growth within this segment (and commands a higher margin) Contracts in place with three of the largest Niobrara producers, who comprise over 40% of the acreage in the play, to provide water disposal services, with approximately 75% of all producing wells using HSE facilities Niobrara Shale Nebraska Colorado

17 DJ Basin - Strong Market Position
Currently the largest oil and gas waste water disposal business in Colorado Strategically located throughout Denver-Julesburg Basin Facilities and Disposal Capacity Apollo (Competitor) 1 – 1,000 bbls/day High Plains (Competitor) 1 – 2,600 bbls/day 2 – 1,700 bbls/day HSWS Existing & Under Construction C1 – 11,200 bbls/day (2 wells) C2 – 5,400 bbls/day (1 well) C3 – 6,700 bbls/day (1 well) C4 – 5,000 bbls/day (1 well) C6 – 5,500 bbls/day (1 well) C7 – 7,500 bbls/day (1 well) C8 – 7,500 bbls/day (est.) HSWS Planned Expansion C9 – 6,000 bbls/day (2013) C10 – 6,000 bbls/day (2014) C11 – 6000 bbls/day (2015) Weld County Talking Points: Discuss how facilities are operated at/near capacity and trucks go from 1 facility to another if the facility that the truck first shows up at is full Note that C9 and C10 facilities will be developed after receiving contractual commitments Note that expansion is being driven by increasing demand Note: Larger circles illustrate larger disposal capacity 17

18 DJ Basin Water Segment Critical Services in the DJ Basin
Competitive Advantage Over 1,000 wells drilled in 2011, with the majority of these wells drilled in the core of the play, the Wattenberg Field in Weld County, CO Drilling expected to exceed 1,500 wells per year by 2015 Frac jobs require 2 – 4 million gallons of water per well Water recycling services becoming increasingly important in coming years due to water sourcing and preservation concerns Currently, water is primarily obtained from municipalities Most other groundwater and surface water is designated for agriculture or subject to usage restrictions Largest water disposal operation in the Niobrara play; operations are currently concentrated in the play’s core, the Wattenberg Field Currently disposes approximately 80% of all waste water generated in and around the Wattenberg Field The facilities run at near full capacity as a result of rapidly increased drilling Patented technology Primary Growth Opportunities Continue to grow with largest current customers: 5 additional disposal wells planned through 2015, bringing total capacity to over 70,000 bbls per day 2 recycling facilities to allow for water re-use in the field Provide water trucking services. Expand producer relationships, with an emphasis on Northern Weld County. Additional relationships will lead to additional disposal and recycling plants

19 Mississippian Water Segment
Water Needs in This Area IRRs of Liquid Rich Plays(1) Wells in this area produce a significant amount of water Oklahoma is an oil & gas regulatory friendly state that understands the industry need for deep hole injection wells As the Mississippian play continues to expand, water from recycling will become and increasing source of water supply for drilling operations Competitive Position in the Mississippian Play Primary Growth Opportunities The largest water operation in the play through ownership of approximately 50 trucks and trailers and 67 frac tanks; approximately 40% – 50% larger than the number two provider in the play Two largest E&P customers have a total of 41 rigs drilling in the Mississippian and are the two most active in the play currently No direct commodity price exposure Extremely well positioned to grow operations along with the continued growth of the Mississippian play _____________________ Source: Wall Street Research.

20 Pro Forma Adjusted EBITDA - $28.1mm
Crude Oil Logistics Pro Forma Adjusted EBITDA - $28.1mm

21 Crude Oil Logistics Primarily focused on purchasing crude oil from producers at oil and gas wells throughout the Midcontinent, Rocky Mountain, and Gulf Coast regions, and transporting it for re-sale to a pipeline injection point, storage terminal, barge loading facility, rail facility, refinery, or trade hub Crude Segment also purchases natural gasoline and condensate from gas plants for re-sale Average volumes of approximately 60,000 barrels of crude oil per day Approximately 4,000 active lease locations, representing ~ 500 different producers or marketers Transportation logistics optimized through utilization of linear programming 20+ year track record of customer retention Additionally, transports NGLs and other hydrocarbons for third parties for a fixed-fee per barrel Expanding the rail and barge operations to grow volumes and enhance margins Speaker: Mark Talking Points: Growth prospects in this segment are just as exciting as water, given the increase in domestic oil projects (even without projects still plenty of growth potential) Strong demand for services – can grow volumes as fast as we can grow our own infrastructure Support retention statement by quantifying length of relationship with customers (including with predecessor companies) Customers include producers and refiners

22 Crude Oil Logistics (cont.)
Crude Oil Business Model P P – Purchase Point S – Sales Point Purchase from ~4,000 active lease locations representing ~500 producers Average volumes of ~60,000 bbls/day Company owned or leased Barge Terminal Common Carrier Pipelines Cushing, OK or other trade hub Storage terminals in Rio Hondo, TX (owned) and Catoosa, OK (leased) Refinery S Leased Railcars Owned Truck or Common Carrier Truck Speaker: Mark

23 Crude Oil Logistics - Suppliers, Customers & Contracts
Purchase and sale transactions are entered into on a back-to-back basis As crude oil or NGLs are purchased, one or more sale transactions are entered into involving physical deliveries of crude oil or NGLs Purchase and sale contracts are each based on a commodity price index, typically set for a 30-day term for crude oil and up to one year for NGLs and renewed on an evergreen basis Financial hedges used for inter-month deliveries and for physical inventory Strict open position limits under Market Risk Policy Long-term relationships with high-quality suppliers and customers Credit department monitors counterparty exposure Speaker: Mark Talking Points: Discuss why short term contracts in this business are appropriate. Prior agency concern with this. In order to keep margins consistent, contracts are kept short due to transportation rate fluctuations Cost of transportation fluctuates and long term contracts lock you into rates for terms in excess of when your transportation costs may move. Suppliers and contractors want this too. Allows producers to take advantage of backwardation in markets. Refineries want 30 day evergreens too because of crude slate change Point out length of relationships

24 Pro Forma Adjusted EBITDA - $18.6mm
NGL Railcar Segment Pro Forma Adjusted EBITDA - $18.6mm

25 NGL Logistics (Railcar)
Transports and markets natural gas liquids (“NGLs”) to and from refiners, gas processors, propane wholesalers, petrochemical plants and other merchant users or wholesalers of NGLs Leading service provider, growing primarily through existing customer relationships with major refiners, petrochemical companies, and gas processors – in some cases up to 20 years Ability to combine knowledge of non-transparent markets with superior rail logistics, utilizing a 10 person team of logistics specialists who optimize margins by efficient use of rail cars NGL’s capabilities and knowledge of rail logistics have become an integral tool for large, integrated oil and gas companies who wish to outsource the product procurement and delivery process Nationwide service offering in each of the lower 48 states and Canada is a competitive advantage relative to competitors, many of which have regionally focused operations Utilization of terminal storage to take advantage of seasonal price differentials Volumes are largely comprised of propane, butane and asphalt Purchase and sale transactions are entered into on a back-to-back basis for matched aggregate exposure Average volumes of approximately 45,000 barrels per day from approximately 100 customers in 140 locations Speaker: David Talking Points: Support retention statement by quantifying length of relationship with customers (including with predecessor companies) Note dedicated team of 6-7 people w strong experience/expertise Discuss utilization or rail cars and how most companies do not handle rail car logistics – it is not their area of competence and HSE is differentiated in this area with its expertise Mention how HSE has access to all markets and ability to take advantage of arbitrage opportunities Not factored in forecast

26 NGL Logistics (Terminals) Pro Forma Adjusted EBITDA - $11.8mm

27 NGL Logistics (Terminals)
18 proprietary terminals serving over customers 10 terminals with rail loading capability 5 multi-product terminals Railcar fleet of 431 pressure cars, growing to by 4Q 2012, and 210 general purpose cars Automated truck loading and unloading facilities that operate 24 hours a day 16.5 million gallons above ground storage Terminal throughput of 419 million gallons of propane projected in 2012 – 2013

28 NGL Logistics - Rosemount, MN Terminal

29 NGL Logistics (Wholesale Supply & Marketing)
Pro Forma Adjusted EBITDA - $18.5mm

30 NGL Logistics (Wholesale Supply & Marketing)
Extensive customer base with over 700 wholesale customers in 40 states Open access to 7 common carrier pipelines 880 million gallons of propane projected to be sold in 18 proprietary owned terminals 165 million gallons of NGL leased storage capacity

31 Pro Forma Adjusted EBITDA - $69.7mm
Retail Pro Forma Adjusted EBITDA - $69.7mm

32 North American Propane
NGLEP Retail Hicksgas Downeast Pacer Osterman North American Propane Pacer Global Propane Brantley Propane Central Proflame Approximately 280,000 customers 85 customer service locations 51 satellite distribution locations 90% tank ownership 145 million propane gallons 38 million distillate gallons Above ground storage capacity of approximately 8 million gallons

33 Combination Creates Market Leader
Growth-oriented, diversified midstream MLP, with significant, stable cash flows to sustain consistent distribution increases and disciplined approach to leverage NGL has a significant presence in multiple energy segments Market leader in oil and gas field waste water treatment Gathers approximately 60,000 barrels of crude oil per day One of the five largest private terminal owner/operators, with 18 terminals in U.S. and Canada Over 2,500 leased rail cars hauling NGLs and crude oil 165 million gallons of underground leased storage, 16.5 million gallons of owned above-ground storage and eight million gallons of storage at retail district locations Top six propane and fuel oil retailer Over 1,700 employees

34 Transaction Benefits Enhances access to equity and debt markets, diversifying funding sources Significant excess cash flow to fund low multiple growth projects and reduce debt Improves credit metrics and accelerates investment grade rating Increased float promoting greater daily trading volume Water Segment provides leading position in rapidly expanding midstream market segment Increased penetration into domestic Shale Plays with more diverse set of services Addition of experienced, highly regarded midstream executive and operating management team Enhanced geographic and business line diversification

35 Diversified Business Operations
NGL EBITDA Contribution by Segment (1) NGL Logistics Combined EBITDA Contribution by Segment (1) Water Services Retail Retail High Sierra EBITDA Contribution by Segment (1) NGL Logistics Crude Oil Logistics Water Services NGL Logistics Crude Oil Logistics _____________________ Represents estimated pre-G&A segment EBITDA for the fiscal year ending 3/31/2013.

36 Pro Forma Financials (No Growth Case)

37 Pro-Forma Combined EBITDA Forecast
(in millions except per unit amounts) _____________________ Note: Reflects full fiscal year 2013 (i.e. 12 month period ending 3/31/2013).

38 Pro-Forma Combined Distributable Cash Flow Forecast
(in millions except per unit amounts) _____________________ Note: Reflects full fiscal year 2013 (i.e. 12 month period ending 3/31/2013). Canadian income taxes, minority interest related to compression segment and removal of non-cash deferred gains on asset sales.

39 Pro Forma FY 2013 Debt Schedule
(in millions) _____________________ Assumes debt paydowns occur at the end of the fiscal year and therefore do not impact interest expense until the following year.

40 Pro Forma Financials (Growth Case)

41 Pro-Forma Combined EBITDA Growth Forecast
(in millions except per unit amounts) _____________________ Assumes $150 million of acquisitions in FY 2013 and $200 million in each of FY 2014 and Acquisitions are assumed at a 5.0x EBITDA multiple and occur mid-year (i.e. only half of the EBITDA is realized in the year in which the acquisition occurs). Assumes 100% debt financing.

42 Pro-Forma Combined Distributable Cash Flow Growth Forecast
(in millions except per unit amounts) _____________________ HSE's Canadian income taxes, minority interest related to compression segment and removal of non-cash deferred gains on asset sales. Assumes $.05 per unit annualized distribution increase each quarter.

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