1. Water Disposal – An Assessment of Disposal Wells and Facilities
Eric Peterson
Strategic Planning & Market Analysis
May 2014
2. •Confidential & Proprietary•Confidential & Proprietary
Retail
Propane
15%
Crude
Logistics
48%
Water
Solutions
23%
NGL
14%
NGL Energy Partners Overview
NGL is a midstream MLP with four business
segments operating in multiple oil and gas
producing regions in the United States
− Crude Oil Logistics
− Water Solutions
− NGL Logistics
− Retail Propane
Multiple midstream solutions for upstream
companies
Geographic diversification across the most
active resource / shale regions as well as coast
to coast
Focused on generating stable and repeatable
cash flows
Approximately 2,400 employees
Financial snapshot:
− Market Cap: ~$3.13 billion
− Pro-forma EBITDA: $400 million
(1) Represents estimated pre-G&A pro-forma segment EBITDA for the
fiscal year ending 3/31/2013 and excludes acquisition cost addbacks.
Area of Operations
Contribution by Segment to EBITDA
Eagle Ford
Marcellus
Shale
DJ
Basin
Green River
Basin
Bakken
Shale
Mississippi Lime
Granite Wash
Permian
Basin
Eagle Ford
Marcellus
Shale
DJ
Basin
Green River
Basin
Bakken
Shale
Mississippi Lime
Granite Wash
Permian
Basin
Crude Barges
Water Services
Railcar NGL terminal
Refinery terminal
NGL proprietary terminal
Natural gas liquids segment
NGL leased storage
Assets and marketing presence
Pipeline
Crude oil segment
Crude barge terminal
NGL
Retail Propane > 10 mm gallons
Crude operational area
Crude Barges
Water Services
Railcar NGL terminal
Refinery terminal
NGL proprietary terminal
Natural gas liquids segment
NGL leased storage
Assets and marketing presence
Pipeline
Crude oil segment
Crude barge terminal
NGL
Retail Propane > 10 mm gallons
Crude operational area
2
3. •Confidential & Proprietary•Confidential & Proprietary
Retail
Propane
15%
Crude
Logistics
48%
Water
Solutions
23%
NGL
14%
Segment Contribution to EBITDA
Areas of Operation and InterestSegment Operations
NGL Water Solutions
Provides services for the transportation,
treatment and disposal of wastewater
generated from oil and natural gas production
Design, build, own, operate (DBOO) business
model
Multiple treatment, disposal, and recycling
facilities located in various basins within the
United States
Provides customized water treatment solutions
Operates state-of-the-art R&D facility to
develop solutions and support field operations
Multiple process patents issued with additional
patents currently pending
3
4. •Confidential & Proprietary•Confidential & Proprietary
Size, Scale and Expertise Sets NGL Apart
21 injection well disposal facilities
− 380k bpd total injection capacity
3 centralized treatment/recycle facilities
− 80,000 bpd recycle capacity
− 35MM bbls to date
− 20,000 bpd treat to environmental discharge standard
− 7MM bbls to date
Private R&D Pilot Facility
− Optimize custom treatment solutions (no “one size fits all”)
− Technology neutral
− Physical, chemical, thermal unit process capabilities
− 10,000 square foot warehouse
− State-of-the-art analytical laboratory
− Flow rates up to 10 gpm
− Full time research staff with decades of experience
4
6. •Confidential & Proprietary•Confidential & Proprietary
Observations
6
• High IRR plays incentivize drilling activity
• Horizontal drilling activity is the largest driver of waste water production
• Frac volumes and geology determine flowback volumes
• Treatment, recycle, reuse and/or disposal used for wastewater
management, but typically disposal wells are the most cost effective
when viable
• Disposal well viability hinges on geology, water quality, water quantity
and economics
7. •Confidential & Proprietary•Confidential & Proprietary
7
Source: RBN Energy May 2014
Utica
Marcellus - Dry
Uinta
Dry
Gas
Wet
Gas
Oil
20%
Piceance
Permian
Bakken
DJ -Niobrara
Eagle Ford
48%
Granite Wash
Miss Lime55%
42%
42%
Pinedale
IRR’s of Various Plays – High IRR Drives Drilling Activity
9%
15%
15%
20%
48%
35%
63%55%
45%-
73%
61%
Haynesville
Fayetteville
Barnett
Marcellus - Wet
8. •Confidential & Proprietary•Confidential & Proprietary
U.S. Active Rig Locations – May 21, 2014
Source: RigData
Horizontal
Vertical
Directional
0
200
400
600
800
1,000
1,200
HRZ VER DIR
9. •Confidential & Proprietary•Confidential & Proprietary
Frac Volumes – Horizontal Wells Are Primary Drivers for
Water Supply Growth
9
FracFocus.org Wells Fracked in April-May 2014
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Vertical Horizontal
FracVolumes(gal)
Millions Average Frac Volumes Used
Weld County
10. •Confidential & Proprietary•Confidential & Proprietary
Frac Water Usage – Volume of frac water injected
drives flowback volume
10
FracFocus.org Hz Wells Fracked in April-May 2014
0
2
4
6
8
10
12
14
16
18
20
FracVolumes(gals)
Millions
Hz Frac Volumes and Flowback % by Play per Well
% Flowback
11. •Confidential & Proprietary•Confidential & Proprietary
Flowback vs Produced Water
11
• Flowback occurs for the first 7-14 days
• Peak total production tops early but drops by over 80% over the next two weeks
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1 11 21 31 41 51
%ofTotal5YrWaterProd
WaterVolumes(bpd)
Days Producing
Typical Hz Oil Well Water Production vs. Time
Flow Back
Production
% of Total Volume
12. •Confidential & Proprietary•Confidential & Proprietary
Per Well Water Production of Select Plays –
Horizontal wells onlyWaterProduction(b/d)
Year 1
Year 2
Year 3
Year 4
Year 5
12
13. •Confidential & Proprietary•Confidential & Proprietary
Produced Water Generation in Shale Plays:
Dependent on Geology of Shale Formation
High “Long Term” Produced Water Generating Play
Permian:
− Formation characteristics result in high produced water generation
− Higher volumes of natural formation water present in / near shale
Moderate “Long Term” Produced Water Generating Plays
Eagle Ford Shale
Bakken
− Formation characteristics allow less fluid production per MMCF/bbl
− Relatively dry formation
Low “Long Term” Produced Water Generating Plays
DJ, Utica, Marcellus Shale
Higher water production in South (West Virginia), lower in North (Pennsylvania)
− Shale formation characteristics tend to “trap” fluids
− Very dry formation
− Water is “bound to formation”
Source: CHK
13
14. •Confidential & Proprietary•Confidential & Proprietary
Disposal Wells vs Alternative Methods
Disposal
− Provide producers affordable well-disposal of wastewater
− Water treatment separates solids and hydrocarbons from water prior to
disposal
− Certain facilities are pipeline connected, providing stronger customer
relationship with the producers
Treatment for Re-Use
− Clean water can be re-used by producers for fracking, well drilling and
completion projects
− Offers producers an alternative to fresh water that minimizes the impact on
aquifers, particularly in arid regions of the U.S.
Treatment for Discharge
− Cleans water to environmental discharge water quality
Resource Recovery
− Create high purity brine from oilfield waste water
− Apply crystallization or chlor-alkali process
− Yields valuable chemical products in lieu of waste stream
14
15. •Confidential & Proprietary•Confidential & Proprietary
Disposal Fees – Range from low end of produced water
to high end of flowback
15
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
Eagle Ford Permian DJ Bakken
DisposalFees
Does not include hauling costs which
can range from $2 - $10/bbl
Flowback vs. Produced Water
17. •Confidential & Proprietary•Confidential & Proprietary
17
DJ Basin – 2 recycling facilities and 100k bpd disposal
capacity with another +50k bpd in the next 2 years
Water Facilities
Growth Sites
Hz Wells
30 Day IP Rate
18. •Confidential & Proprietary•Confidential & Proprietary
Permian Basin – 75k bpd disposal capacity with an
additional +80k bpd expected over the next year
18
Water Facilities
Growth Sites
Hz Wells
30 Day IP Rate
19. •Confidential & Proprietary•Confidential & Proprietary
Eagle Ford – 220k bpd disposal capacity with an
additional +120k bpd expected in the next 3 years
19
Water Facilities
Growth Sites
Hz Wells
30 Day IP Rate
20. •Confidential & Proprietary•Confidential & Proprietary
Conclusions
20
• High IRR plays incentivize drilling activity
• Horizontal drilling activity is the largest driver of waste water production
• Frac volumes and geology determine flowback volumes
• Treatment, recycle, reuse and/or disposal used for wastewater
management, but typically disposal wells are the most cost effective
when viable
• Disposal well viability hinges on geology, water quality, water quantity
and economics
• NGL Water Solutions has a DBOO business model that provides
customized wastewater management solutions
21. •Confidential & Proprietary•Confidential & Proprietary
Eric Peterson
Strategic Planning & Market Analysis
epeterson@highsierraenergy.com
21
Contact Information
Greg Blais
VP – Business Development
gblais@highsierraenergy.com
Editor's Notes
4 groups, were a big company, major presence, here to talk about water
Customized solutions provider, DBOO, one size doesn’t fit all, you save capacitla, we build it and operate
In major growing shale plays
21 wells, handel 380 bpd, (show passion for it) we have a 100MM water business, treatment is a big part of the game, one of few companies that can handle that amount of volume in treatment and recycling
R&D Facility sets us apart from anyone else – no one else does R&D like we do
Tech nuetral, so we are not married to any given product or technology, we bring in water from around North america to develop customized solutions
Range of IRRs reflects various sub-regions within each plays
Higher the IRR, the higher the drilling activity
Drilling is primariliy Hz
Geology Matters!
Part of the reason we are all over these plays is because the largest part of disposal cost comes from transportation. A large footprint alleviates that