The document discusses how Rockies crude oil transported by rail could reshape California's crude market. It notes that while midstream infrastructure buildout continues elsewhere, the West Coast remains disconnected from pipelines. It then outlines plans for a new crude-by-rail terminal called Niobrara Connector in the DJ Basin that could bring cost-advantaged US crudes like those from the Niobrara to markets in California to help fill the gap left by declining Alaskan oil and foreign imports. The terminal aims to capitalize on the fact that rail transportation of Niobrara crude can be more economical than other plays for parts of the West Coast.

1. Rockies Crude to the West Coast
California Crude Market and How Rockies Crude Coming by Rail
Will Reshuffle the Market Dynamics
Eric Peterson
Senior Business Analyst
Moving Crude Supplies to West Coast End Markets
Los Angeles, CA
December 2014

2. Introduction to ARB Midstream
• Denver based infrastructure development company
providing midstream solutions
• Strong financial support from private equity
• Utilize in-depth fundamental analysis to identify
value propositions of our assets
• Emphasis on early stage development opportunities
• Developing a new crude-by-rail terminal
• Niobrara Connector “NiCon”
• Centrally located in the DJ Basin
• Unit train capable
• Scheduled in-service date: Q3 2015
2

3. Observations
3
• Drilling activity continues to accelerate in many plays,
driving incremental growth in crude oil production
• Even in a low Brent price environment, many plays
remain economical
• Midstream infrastructure build out continues, however,
the West Coast is still disconnected from the pipeline
network
• California imports ~800,000 bpd of waterborne crude
from markets other than ANS and Canada
• ANS crude is well poised to reach the global markets,
leaving possible market share for domestic US crudes
• Crude By Rail is critical to bringing more cost
advantaged US crude oil barrels to the West Coast
• The Niobrara is more economical than other plays in
terms of transport costs to parts of the West Coast

4. Brent Breakeven Prices of Various Plays
4
Utica
Permian
Bakken
DJ Basin
Eagle Ford
$60
Mid-Con
$53
$55 $69
$66
Source: Company Reports and Citi Research Estimates
$58
Monteray
$54

5. Growing Plays Show a Rapid Increase in Hz
Rig Count, While Mature Plays Focus on Rig
Efficiency
Horizontal
Vertical
Directional
-16 /
+768
-8 /
+377
+19 /
+114
+62 /
+409
Hz Rig Change /
Production Increase
(Mbpd)
Oct ‘12 – Oct ‘14
Source: RigData, HPDI 5

6. The Introduction of Hz Rigs and Their
Continued Increase in Numbers Has Caused
Rapid Growth in Crude Production
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
0 12 24 36 48 60 72
IncrementalProduction(bpd)
Months Developed
Bakken
PRB
DJ Basin
Permian
Eagle Ford
6
Mature Plays
Growing Plays
Source: HPDI, ARB Midstream

7. -
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2012 2013 2016 2019
Mbpd
US Crude Oil Production
PADD 1 PADD 2 PADD 3 PADD 4 PADD 5
-
1,000
2,000
3,000
4,000
5,000
6,000
2012 2013 2016 2019
Mbpd
Canadian Production
WC Oil Sands WC Conventional EC Domestic
Over the Next 5 Years, New Shale Oil and Oil Sands Supply
Will Find New Markets in the U.S, While Displacing Over
5MMbpd of Waterborne Crude Imports
7
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2012 2013 2016 2019
Mbpd
US Waterborne Imports
PADD 5
PADD 3
PADD 1
Source: EIA, Bentek

8. Big Differentials Cause the Market to Build
Pipelines to Break Through the Barriers
8Source: Bloomberg
WCS
WTI - 24
ANS
WTI + 10
WTS
WTI - 3
Bakken
WTI - 5
LLS
WTI + 9
Brent
WTI + 11
WTI
$98
Based off of 2013 Average Prices and Differentials

9. Over 9MMbpd of New Pipeline Capacity Has
Been Built Since 2012 With Another
~9.5MMbpd Under Construction or Planned
Williston
DJ-
Niobrara
Permian
Eagle
Ford
Utica
Anadarko
Source: Company Information, ARB Midstream
*Not All Pipelines Shown
No
Pipelines
to the
West
Coast
9

10. California Balance

11. Largest Sources of Crude Oil Are
Expensive ANS and Foreign Waterborne
549
0
200
400
600
800
1000
1200
1400
1600
1800
CrudeVolumes(Mbpd)
California Crude Supply
Rail
Canada
Alaska Crude
California Crude
Foreign
Source: EIA, HPDI, California Energy Almanac, Bentek 11

12. Little to No Growth in California
Production Over the Next 5 Years
12Source: HPDI, Bentek
-
100
200
300
400
500
600
700
CrudeProduction(Mbpd)
California Production
San Joaquin
Sacramento
California Offshore
CA Coast
Forecast

13. Horizontal Rigs, A Key Part of Unlocking Tight
Oil In North America, Have Not Made
Meaningful Progress In California
13
0
10
20
30
40
50
60
RigCount
California Rig Count by Type
Directional Vertical Horizontal
Source: BakerHughes

14. Meanwhile ANS Production, A Major Input Into
California, Set To Decline 20% (100kbpd)
Leaving Production Just Under 400kbpd
0
100
200
300
400
500
600
700
800
CrudeProduction(Mbpd)
Alaska Production
Forecast
Source: HPDI, Bentek 14

15. 800,000 bpd of Waterborne Imports Into
California
Note: ANS and Canadian imports not included
Los Angeles,
1,006San Fransisco,
853
Bakersfield,
120
Refining Capacity
('000s bpd)
-
100
200
300
400
500
600
700
800
900
CrudeImports(Mbpd)
Foreign Imports Into California
Source: EIA 15

16. -
20,000
40,000
60,000
80,000
100,000
120,000
2013CaliforniaWaterborneImports(bpd)
API Gravity
LA
SF
2013 California Imports by API show similar
quality to Permian, Niobrara and Canadian.
BakkenDilbit/Synbit Permian
Niobrara
Source: EIA
Note: ANS and Canadian imports not included
16

17. CBR Provides Backfill for ANS and Foreign
Imports, creating up to 350Mbpd of California
Incremental Demand for Inland US Crudes
Railroads
UP
BNSF
Other
Backfill for
ANS
100-125
Mbpd
Bakken
DJ-
Niobrara
Permian
Source: BTU Analytics
Backfill ANS
and Foreign
180-200 Mbpd
Backfill ANS
and Foreign
130-150 Mbpd
17

18. Unit Train Crude Transportation Rates
$10
Railroads
UP
BNSF
Other
Source: Argus, ARB Midstream 18

19. Niobrara Connector “NiCon”
Crude by Rail Terminal

20. Niobrara Connector “NiCon” –
Centrally located in the DJ Basin
20
PXP NECL

21. A Look at Niobrara Connector “NiCon”
Crude-by-Rail Terminal Specifications
21
• 79,000 bpd nameplate capacity
• 120 car unit train capable
• 224 Acres
• Industrial spur serviced by the UP
• In Service date Q3 2015
• Segregation of product in up to 4 - 100,000 bbl tanks

22. Summary
22
• Drilling activity continues to accelerate in many plays,
driving incremental growth in crude oil production
• Even in a low Brent price environment, many plays
remain economical
• Midstream infrastructure build out continues, however,
the West Coast is still disconnected from the pipeline
network
• California imports ~800,000 bpd of waterborne crude
from markets other than ANS and Canada
• ANS crude is well poised to reach the global markets,
leaving possible market share for domestic US crudes
• Crude By Rail is critical to bringing more cost
advantaged US crude oil barrels to the West Coast
• The Niobrara is more economical than other plays in
terms of transport costs to parts of the West Coast

23. Eric Peterson
Senior Business Analyst
eric.peterson@arbmidstream.com
www.arbmidstream.com