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Confidential Presentation Pony Express Pipeline Uncommitted Shipper Meeting July 17, 2014 Lakewood, Colorado.

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Presentation on theme: "Confidential Presentation Pony Express Pipeline Uncommitted Shipper Meeting July 17, 2014 Lakewood, Colorado."— Presentation transcript:

1 Confidential Presentation Pony Express Pipeline Uncommitted Shipper Meeting July 17, 2014 Lakewood, Colorado

2 Introduction CONFIDENTIAL 2 Steven Kelley – Scheduler, Oil Logistics

3 Pony Express Pipeline – Meeting Agenda  Introduction – Steve Kelley, Scheduler Oil Logistics  Construction Update – Doug Johnson, General Manager  Line Fill  PXP Web Site –  Credit Application  -- Break Time --  Nominations / Prorations / Scheduling  Regulatory Filings / Tariff  Accounting Processes – Mona Walker, Manager Operation Accounting  Tallgrass PXP Contacts CONFIDENTIAL 3

4 PXP Construction Status CONFIDENTIAL 4 Doug Johnson – General Manager

5 System Map 5 CONFIDENTIAL

6 Pony Express Pipeline – Construction Update PXP Construction Update  Mainline – 20”, 22”, 24”  New 24” Build, Lincoln County, KS to Cushing, OK  Conversion Pipe: Guernsey – Lincoln Co. KS  Guernsey Station  Mainline Pump Stations  Hydro-test:  Conversion Pipe 19/32 sections complete  New Build 4/9 sections complete Deeprock Terminal – Cushing, OK Ponca City Lateral Northeast Colorado Lateral (NECL)  Pipeline  Sterling Tank Farm CONFIDENTIAL 6

7 Pony Express Terminus at Cushing Deeprock  Tanks 3 existing tanks 6 new tanks completed  Twin 24-inch pipelines to connecting terminals  Interconnections Tariff includes delivery to Rose Rock, Blue Knight, Enbridge, Plains, or Enterprise Additional fee by Deeprock for deliveries to: NGL Seaway CONFIDENTIAL 7

8 CONFIDENTIAL 8 Pawnee Lateral - 13 miles of 16” Buckingham Lateral - 54 miles of 20” Sterling Tank Farm – 6 new tanks under construction.  4 – 250,000  2 – 150,000 5 additional pump stations on the PXP mainline. NECL Northeast Colorado Lateral – Sterling

9 Line Fill Process CONFIDENTIAL 9

10 System Map 10

11 Line Fill 11 Three pipeline segments: 20”, 22”, and 24”  20” pipeline, 139 miles  22” pipeline, 242 miles  24” pipeline, 312 miles Storage tank (~130,000 bbl working capacity) has been secured at Ft. Laramie to assist with operational flexibility during line fill July  Begin oil flood of Guernsey pump station on/about 7/22  Line fill will begin on/about 7/23 August/September  Complete remaining 22” line fill  Complete 24” Section line fill

12 Uncommitted Shipper Meeting - July 17 – Lakewood, CO CONFIDENTIAL 12 Steven Kelley - Scheduler, Oil Logistics

13 Somewhere in Wyoming CONFIDENTIAL 13

14 PXP Guernsey Station CONFIDENTIAL 14

15 Deeprock-Cushing to PXP Delivery Points CONFIDENTIAL 15

16 Shipper Meeting – July 17 – Lakewood, CO CONFIDENTIAL 16

17 CONFIDENTIAL 17

18 System Map CONFIDENTIAL 18

19 System Map CONFIDENTIAL 19

20 Pony Express Pipeline (PXP)- System Information CONFIDENTIAL 20

21 Pony Express Pipeline – Nomination Information CONFIDENTIAL 21

22 PXP – Common Stream Descriptions CONFIDENTIAL 22

23 PXP – Information for Walk-Up Shippers CONFIDENTIAL 23

24 PXP – Information for Walk-Up Shippers CONFIDENTIAL 24

25 PXP – Information for Walk-Up Shippers CONFIDENTIAL 25

26 PXP – Information for Walk-Up Shippers CONFIDENTIAL 26

27 PXP – Information for Walk-Up Shippers CONFIDENTIAL 27

28 CONFIDENTIAL 28 PXP – Rules and Regulations

29 CONFIDENTIAL 29 PXP – Tariff Rates

30 PXP - Forms CONFIDENTIAL 30

31 PXP – Credit Application Form CONFIDENTIAL 31

32 PXP – Credit Application 32 CONTACT INFO: Kevin O’Brien Treasury Manager

33 PXP – Credit Application 33 Potential shippers are encouraged to arrange credit at the earliest possible time. PXP will only consider nominations for which credit arrangements have been made prior to nomination, or for nominations accompanied by an acceptable Letter of Credit or full prepayment.

34 Nominations --- Break Time --- CONFIDENTIAL 34

35 Guernsey Tank Farms CONFIDENTIAL 35

36 Common Stream Descriptions CONFIDENTIAL 36 Pony Express is a “multiple common stream” carrier. Pony Express will transport batches of up to three common streams from its Guernsey origin, and a fourth common stream from northeastern Colorado. The initial common streams are characterized as: BLS - The Bakken Light Sweet common stream or “BLS” will originate at Guernsey and will contain not greater than.2% sulfur and will have an API gravity of not less than 40 degrees or more than 46 degrees. MXS - The Mixed Sweet common stream or “MXS” will originate at Guernsey and will contain not greater than.5% sulfur and will have an API gravity of not less than 30 degrees or more than 38 degrees. GWI - The Guernsey Wyoming Intermediate common stream or “GWI” will originate at Guernsey and will contain not greater than.42% sulfur and will have an API gravity of not less than 36 degrees or more than 42 degrees. NIO - The Niobrara common stream or “NIO” will originate at receipt points on the NECL and will contain not greater than.42% sulfur and will have an API gravity of not less than 36 degrees or more than 42 degrees.

37 Nominations CONFIDENTIAL 37 Material Safety Data Sheets (MSDS)  Initial Nominations must be accompanied by an appropriate MSDS.  Nominations lacking the appropriate MSDS will not be considered.

38 Nominations 38 Nominations  Ten Percent (10%) of Available Capacity is for Uncommitted Shippers Belle Fourche Joint Tariff = 12,200 bpd / 370,000 bpm Hiland HH Joint Tariff = 4,200 bpd / 127,000 bpm Local PXP Tariff = 6,100 bpd / 185,000 bpm (figures are approximate)

39 Nominations 39 Nominations (continued)  All Nominations are due to PXP by 5:00 PM Central Time on the 20 th calendar day or the preceding business day if the 20 th is on non-business day.  All Nominations must include: Receipt Point: Guernsey- PXP / Belle Fourche Joint Tariff Guernsey- PXP / Hiland Joint Tariff Guernsey- PXP Local Tariff Delivery Point: Oklahoma Other future sites Destination: Rose Rock, BKEP, Enbridge, Plains, Enterprise, NGL (8¢), Seaway (10¢), Ponca City (Phillips 66), or to LINEFILL.

40 Nominations 40  All Nominations must include: Crude Type: BLS – Bakken Light Sweet MXS – Mixed Sweet GWI – Guernsey Wyoming Intermediate NIO - Niobrara Volume: In Barrels per Day (bpd) By grade By destination  Minimum Nomination is 10,000 bbls per month per Silo. Can be different grades to total 10,000 bbls  DO NOT OVER NOMINATE !  Awarded Nominations are BINDING !

41 Nominations - 41 Nominations (continued)  Nominations for shipments on The Belle Fourche – PXP Joint Tariff must be made to and confirmed by both BFPL and PXP.  Nominations for shipments on The Hiland - PXP Joint Tariff must be made to and confirmed by both Hiland and PXP.  Shipments originating at Guernsey under the PXP Local Tariff require Nomination and confirmation by PXP, and will need to be confirmed by the applicable upstream Carrier.

42 PXP – Nomination Form CONFIDENTIAL 42

43 Nominations 43 Nominations (continued)  All initial nominations must also include additional volume of 27% for pro rata LINEFILL.  EXAMPLE: 1 st month Nomination10,000 bbls 1 st month ProRata Linefill 2,700 bbls 2 nd month Nomination15,000 bbls 2 nd month ProRata Linefill 1,350 bbls

44 Nominations 44  In-Line Transfers By prior approval, In-Line Transfers may occur between current Shippers Request must be submitted in writing to PXP for approval A nominal fee will apply

45 Nominations 45  Linefill barrels may be withdrawn: 90 days after written notice to cease shipments, and After payment is received in full for all services by PXP

46 Prorations and Awarded Nominations CONFIDENTIAL 46 Prorations: SILO Concept Based on SILO Concept:  Source points at Guernsey: o Belle Fourche Pipeline / PXP Joint Tariff o Hiland Double H Pipeline / PXP Joint Tariff o Local PXP Tariff from Guernsey Sources  Each SILO has defined capacity including 10% for Walk-up  Each SILO prorated independently and separately

47 Prorations and Awarded Nominations – CONFIDENTIAL 47 Prorations: Examples  Belle Fourche 10% is 370,000 bbls/month IF 37+ Shippers Nominate 10,000 bpm or more, then 37 Shippers will each be awarded 10,000 barrels of capacity through a random selection process. IF 30 Shippers Nominate 10,000 bpm and 2 Shippers Nominate 60,000 bpm, then all 32 Shippers will be awarded 10,000 bpm (32 x 10,000 = 320,000) and each of the Shippers who Nominated 60,000 bpm will be awarded an additional 25,000 bpm. Awarded Capacity then is: o 30 10,000 bpm (300,000 bpm) o 2 35,000 bpm ( 70,000 bpm)

48 Prorations and Awarded Nominations CONFIDENTIAL 48  A New Shipper may graduate in a Silo to Regular Shipper status by Nominating and Shipping on PXP in each month of the Base Period in that Silo.  Base Period means the twelve (12) calendar month period:  Beginning thirteen (13) months prior to the current month, and  Excluding the Month preceding the current Month  Base Period Example : Shipper begins in Sept 2014 and ships for 12 consecutive months in one Silo.  In October 2015, a New Shipper would graduate to Regular Shipper after satisfying the Base Period definition. Ship 12 months (Sept thru Aug)

49 Scheduling 49  All Nominations are due to PXP by the 20 th calendar day.  PXP will promptly notify all shippers of any proration and awarded capacity.  PXP will develop and distribute a monthly pumping/delivery schedule to all shippers and connecting carriers

50 Regulatory Filings 50 PXP expects FERC tariff filing to occur in August. Current estimation is that the initial Uncommitted (local) Rate for transportation of crude oil from Guernsey to Cushing will be up to $4.25 per barrel. The estimated rate is subject to change as we near completion of the system and will be filed with the FERC prior to our in-service date.

51 51 Mona Walker – Manager, Operational Accounting

52 PXP Commercial Transaction Management System CONFIDENTIAL 52 Energy Solutions International (ESI) Pony Express Pipeline will be utilizing Synthesis and Pipeline Scheduler for commercial transaction processing. Synthesis is one of the industry best-of-class software systems in the midstream oil and gas industry. Benefits of the PXP operating system to shippers include :  Scheduler: Efficiently and accurately schedule the pipeline system – Make changes, recalculate, and immediately see results and communicate to shippers – Ability to see system future states, with current conditions – Interface seamlessly with transactional accounting system for accurate and efficient monthly close processes

53 PXP Commercial Transaction Management System CONFIDENTIAL 53 Energy Solutions International (ESI) Energy Solutions International (ESI) (continued)  Option to accept nominations from and pass information to shippers via Internet  Import measurement data for transactional calculations  Inventory, and book-to-physical calculations  Tie nominations, tickets, contracts, tariffs together for full financial calculations and accurate shipper statements  Generate and send shipper invoices  Ad hoc reporting and analysis which will allow us to timely responses to shipper requests

54 Accounting Procedures CONFIDENTIAL 54 PXP will apply: A Common Stream, Available Oil Model Applies to all shipments  Joint Tariff  PXP Local Tariff

55 Accounting Procedures CONFIDENTIAL 55 Credit:  New Shippers are required to submit a request for shipper status.  Each Shipper is subject to continual review of its financial position.  PXP reserves the right to limit credit to any Shipper when financially prudent.

56 Accounting Procedures CONFIDENTIAL 56 Billing :  Shippers will be billed on the 15 th calendar day of the invoice month for all barrels delivered.  Receipt and delivery tickets are the controlling documents upon which such billing is based.  Shippers will receive one invoice that identifies all charges on Joint Tariff and PXP systems.

57 Accounting Procedures CONFIDENTIAL 57 Billing : The billing documents included in the invoice package will include:  Shipper statement  PXP Inventory statement  Pipeline and terminal loss allowance assessment  Delivered barrel transportation tariff charges  Any other applicable fees which may include demurrage and pumping fees Payment is due on the 20 th calendar day of the invoice month

58 Shipper Questions and Discussion CONFIDENTIAL 58

59 Pony Express Pipeline - Contacts CONFIDENTIAL 59

60 Confidential Presentation Pony Express Pipeline Uncommitted Shipper Meeting July 17, 2014


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