Copano Energy Eagle Ford Shale Update - May 2012

Copano Energy Eagle Ford Midstream Map

Copano Energy provided an update on its Eagle Ford operations in May. Highlights include:

• Copano is investing $1 billion in organic projects
• Has committed volumes of ~1 Bcf/d with 10 year terms from producers
• Houston Central (200 mmcfd)cryogenic plant is performing better than expected
• Lean oil plant at Houston Central realizing lower recoveries than expected
• New 400 mmcfd cryogenic plant at Houston Central will improve margins further Q1 2013. Another 400 mmcfd expansion coming in 2014
• High NGL content in the Eagle Ford creates short-term constraints, but long-term opportunity

Other growth projects and notes

• DK Pipeline extension will reach into McMullen County by Q2 2013 ($120 million)
• Double Eagle Condensate Pipeline JV - Copano will spend $100 million on the 140 mile condensate gathering system. Building system in partnership with Magellan Midstream (100,000 b/d of capacity planned)

Find the full presentation at copanoenergy.com

Eagle Ford's Location is Long-Term Strategic Advantage

After spending much of the week at Bentek's Benposium, it is clear the Eagle Ford's position in the Gulf Coast energy complex is a long-term advantage.

"The Eagle Ford is exciting because of its location to the Gulf Coast. With rich gas in close proximity to Mont Belvieu, the Eagle Ford's NGL net backs are among the highest in the country" - Kristen Holmquiest, NGL Analytics at Bentek

Energy Isn't New to Texas

The state of Texas leads oil & gas development in the U.S. Almost 44% of active onshore rigs are running in the state. The state has been an energy leader for decades......

For the Eagle Ford, that means the oil companies are close, infrastructure is close, and the chemical complex is very well developed. Midstream operators have announced $5 billion plus in expansions in the past six months. They will collectively add more than 3.2 Bcf/d in processing capacity in the region.

Even that is dwarfed by what oil & gas operators are spending, and both are setting the stage for what's to come. We're only one year into true development and the play is just starting to roll. The half a million barrels a day of liquids the play will produce by the end of the year is clearly on a path to double or triple in the subsequent five.

The play's location also means operators realize better prices. Oil produced in the Bakken Shale, due to constraints and transportation costs, can be priced at a discount from $10 to $20 per barrel less than WTI. Compare that to the Eagle Ford where we're currently seeing positive differentials to WTI, and you see why being close to the refineries is important. $10/bbl makes a big difference on the bottom line.

Risks to Eagle Ford Development

As with all oil & gas plays, the Eagle Ford isn't without risk. Its location offsets the major risks to some degree, but we've seen prices and economies change in the past. $100/bbl oil has driven development to current levels, but if prices dropped below $80/bbl, you'd begin to see a slow down.

As production grows, there could be growing pains. There is only so much capacity for the light crude in the Gulf Coast. If refiners don't act quickly, we could have periods where there simply isn't enough demand for Eagle Ford condensate.

Regency - Talisman - Statoil Plan $150 Million Expansion of Eagle Ford Gathering Assets

Regency Eagle Ford System Map

Regency Energy Partners announced a $150 million expansion of the company's Edwards Lime Gathering Joint Venture. The Eagle Ford pipeline and midstream expansion will bring capacity of the company's system up to 160 mmcfd of natural gas and 17,000 b/d of crude. Regency owns 60% of the joint venture and operates the assets. Talisman and Statoil own the remaining 40%.

Talisman and Statoil are supporting the expansion by dedicating production from their area of mutual interest. The expansion is supported through fee-based contracts and is scheduled for completion in the fourth quarter of 2012.

Read the full press release at regencyenergy.com

Copano Energy Announces 400 mmcf/d Processing Expansion

Copano Energy is adding another 400 mmcf/d processing plant at its Colorado County facility. The cryogenic plant is being built is response to producer demand from the Eagle Ford Shale. The Houston Central complex will have 1.0 Bcf/d of capacity when the project is complete. Copano expects to spend $190 million to construct the facility. The plant is supported by a commitment from a major operator in the Eagle Ford and expected in-service is mid-2014.

"This second cryogenic expansion project reaffirms our commitment to being a leading midstream service provider in the Eagle Ford shale," said R. Bruce Northcutt, President and Chief Executive Officer of Copano Energy. "While we expect to invest capital for this project at a 5-times multiple or better, our producers and customers will also benefit from the expansion through enhanced performance and improved recovery of natural gas liquids."

This is the second major expansion of the facility. The first, is already under construction and will be completed in early 2013.

2012 has been full of midstream announcements. You can read more at our Pipeline and Midstream News page.

Read the full press release at copano.com

Valero Says Eagle Ford Crude Production to Reach 500,000 b/d by Year-End

Valero's CEO says Eagle Ford "crude" production will likely surpass 500,000 b/d by year-end 2012. He went on to say producers have told him that production will likely reach 1 million b/d in the next few years and will back out sweet crude imports from other countries. The industry is getting more confident that 1 million b/d of Eagle Ford production will be here sooner than later. The projection for 500,000 b/d of crude by year-end comes just a week after the EIA projected production of 500,000 b/d of crude and condensate in April. From speaking with industry professionals, I'm confident the EIA's numbers were higher than actual production and might have included NGLs. Either way, we're on a quick path to half a million barrels per day. I'm digging a little deeper and will have more for you in the coming weeks.

The EIA provides a great service, but I trust Valero's projections as they are one of the largest crude buyers in the world. It's their business to know what is going to feed their refineries.