Bill WaldheimBusiness Unit President

November 3, 2011

PFAA – 18th Annual ConferenceNGL InfrastructureBack to the Future

NGL Infrastructure

2

19551985

NGL Infrastructure

3

Flux Capacitor Einstein

Doc Brown

NGL Infrastructure

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1981DeLorean

NGL Infrastructure

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What musician or band wrote the soundtrack for the original movie?

Huey Lewis and the News!

Back in Time – 1990’s-2000’s

A period of declining domestic crude oil production and uncertain gas production

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Mid-Contine

nt

Rockies

Permian

Gulf Coast

GOM

Industry Dynamics• Basin centered conventional drilling

• NGPA drilling incentives for gas

• Crude/Gas relationships remained fairly constant

• Shift in power generation and industrial loads to natural gas

• Petrochemical companies balanced light and heavy feeds and valued feedstock flexibilty

• Consistent growth for plastics and packaging materials following GDP

1986-20002000-2010

Gas Evolution Timeline

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More than 20,000 miles of natural gas transmission pipelines were placed in service in the US over the past 10 years

1990

Deregulate natural gas industry

Conventional / Tight Sands Drilling

Rising natural gas prices

NGPA pricing incentives

2010

Shift in power generation & industrial loads to gas

PetChem industry relied on heavier (Naptha) feeds

Rising demand for plastic & packaging materials

Viewed as environmentally friendly energy source

REX - Rockies & MidCont to East Coast

Gulf Stream - Gulf Coast to Florida

Expanding of Transwestern, El Paso & Questar

Maritimes Portland

Natural Gas Pipeline

Expansion of Texas Intrastate Pipeline infrastructure

More capacity than needed

Repurpose lines

Marcellus displacement

Supply Build Demand BuildInfrastructure

Build Overbuild

Historical Gas Infrastructure Constraints

High gas production with capacity bottlenecks to move gas to market

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Capaci

ty

Const

rain

ts

Move East M

arke

t

Market

Production

Grow

th Areas

West to East Flows

Gas Infrastructure

Gas Infrastructure proposals to alleviate capacity constraints

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West to East Bottleneck

Gas Basis Spreads

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Natural Gas basis spreads narrowed with Gas infrastructure build out

2000’s forward

Drilling shifts to liquids rich areas, driving growth in NGL supply

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Industry Dynamics• Crude/Gas ratios widen• Elevated NGL pricing creates incentive to explore liquids rich targets

• Increase in NGL supply due to emerging wet gas shale plays

• High NGL content of shale plays makes drilling economical for producers despite low natural gas pricing

• Incentives for Petrochemical companies to convert to lighter feed stocks

• Increased domestic ethylene production for U.S and export markets.

Increased NGL Supply

Emerging Shale Plays• Focus shift from natural gas to NGL’s and crude oil

• Increase in production of NGL’s

• E&P activity outpacing resources

• Insufficient local markets• Ethane moves to lowest cost feed for PetChem industry

• Constraints on current infrastructure to handle new production

• “Race to Keep Pace” with drilling/production

• Storage

New rich shale gas driving the need for additional NGL Infrastructure

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Bottleneck

NGL Infrastructure Constraints

NGL evolution is beginning similar to Gas. High NGL production with capacity constraints to move to market

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Market

Wet

Gas

Fairway

Market

Capacity C

onstra

ints

Proposed NGL Infrastructure

Proposed NGL P/L’s• Increased E&P activity• Current infrastructure is inadequate to handle new NGL production forecasts

• New processing, fractionation and pipeline investment is necessary to meet current growth

• Opportunities exist to connect resources to markets

Additional access to Mt. Belvieu expected to drive a tightening in Conway/Belvieu basis spreads

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DCP Midstream’s NGL ProjectsSouthern Hills Pipeline• ~150,000 Bbl/d of NGL capacity• NGL transport service from Conway,

Western Oklahoma and Granite Wash areas to Mont Belvieu in 2013

• Synergistic with growing Rockies and Mid-Continent NGL production

• Provides enhanced connectivity to premium Gulf Coast NGL markets for growing NGL volumes

Providing customers with NGL transportation services15

Sand Hills Pipeline• 720 miles, common carrier pipeline• Expected total capacity of 350,000

Bbl/d into Mont Belvieu• Synergistic with growing Rockies and

Mid-Continent NGL production• 1st phase expected completion Q3

2012 to accommodate growing Eagle Ford liquids volumes

• Service to Permian expected to be available mid-2013

Basis Spreads

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Expect basis spreads to narrow with additional pipeline infrastructure build

Ethane Basis Spreads• Historically fractionators at or

near Conway and Mt. Belvieu processed locally available raw mix

• NGL Demand has grown primarily due to growth in the Petrochemical demand for ethane

• NGL transportation segment is experiencing dwindling available capacity with increasing rates and basis differentials

• Added NGL Infrastructure providing additional access to Mt. Belvieu in the future

??

NGL Evolution Timeline

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2000

Emerging Shale pays

New horizontal drilling technology

Gas to crude ratios

Forward

Shift from to gas fired power generation

Petrochemical companies incentives to convert to lighter feed stocks

Increased consumer demand for plastics and packaging materials

Mapco Seminole Chevron Oneok - OPPL Southern Hills Oneok -

Sterling Sand Hills MEPS Vantage

Pipeline Lone Star

West Texas Pipeline

Texas Express Pipeline

What’s next? Narrow basis

spreads Operational

improvements Extra capacity

to handle outages and turnarounds

Reverse flow on NGL Lines

Repurposing

Supply Build Demand BuildInfrastructure

Build Overbuild

Infrastructure needed to meet production and demand growth

Evolution Timeline

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The NGL market development cycle is evolving similar to gas, just later in time.

Summary

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Question for the Group?

• Where does the Conway / Belvieu basis settle out in the year 2015?

A. At or greater than the transportation cost B. Less than the transportation cost C. No opinion because you don’t care or know• Will the gas / crude spread which is driving the push

to liquids rich E&P plays continue A. Yes, the spread stays wide B. No, market forces pull the spread back to historical levels C. No opinion because you don’t care or know

?