AAPL Texas Land Institute September 11, 2012 Houston, TX Josh Weber

Senior Vice President, Commercial and Business Development 1

Forward-Looking Statement

Statements contained in this presentation that include company expectations or predictions should be considered forward-looking statements.

It is important to note that the actual results of company earnings could differ materially from those projected in such forward-looking statements.

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Agenda

• • • • • • Howard Energy Partners overview Location and timing of capacity additions Selecting optimal plant locations Efficiencies and economics of gas processing Reducing lead time to plant in-service Potential royalty considerations 3

Howard Energy Partners Overview

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Howard Midstream Energy Partners, LLC (“HEP”) is a private midstream company with operations primarily focused in the Eagle Ford Shale

 Founders   Mike Howard (Former President of Midstream for Energy Transfer Partners) Brad Bynum (Former CFO of Hall-Houston Exploration Partners)  Company Strategy   Customer driven, asset oriented solutions to gathering and processing needs (engineering, construction, ownership and operations) Organic growth projects supplemented with strategic acquisitions    Top-tier management and technical capabilities Long-term focus Assets  Started operations June 2011 concurrent with the acquisition of two private companies   Texas Pipeline (250 miles of rich gathering pipeline) Bottom Line Services (midstream energy services) Constructed 30 mile rich header in Dimmit County and put into service October 2011 Completed acquisition of Meritage Midstream’s Eagle Ford and Cuervo Creek gathering systems in April 2012 (170 miles of rich and lean gathering pipeline) 4

Howard Energy Partners Asset Map

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Existing Natural Gas Processing Capacity

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Where Will New Infrastructure Be Available?

(New and Planned Processing Plants in Bold)

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How have plants developed relative to production?

Eagle Ford benefits by having existing infrastructure

2008 2009 2010 2011 2012

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How have plants developed relative to production?

Activity ramps up during 2010 and capacity additions planned

2008 2009 2010 2011 2012

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How have plants developed relative to production?

Significant expansion occurs in 2012 and beyond

2008 2009 2010 2011 2012

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Selecting optimal plant locations

Proximity to:

- Producing Area or P/L Infrastructure - Liquids takeaway (P/L, Trucking, Injection Stations) - Gas Residue P/L Infrastructure

Expansion of existing plants should be explored

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How much total capacity is being added?

New and Planned Processing Plants Plant Name Estimated Startup Owner/Operator Yoakum Plant Phase 2 Chisholm Plant Woodsboro Plant Silver Oak Plant Reveille Plant Houston Central Phase 2 Karnes County Plant Eagle Plant Flag City Plant Jackson County Phase 1 Yoakum Plant Phase 3 Brasada Plant Houston Central Phase 3 Jackson County Phase 2 Jackson County Phase 3 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 Enterprise ETC Southcross Energy Teak Midstream HEP Copano Field Services LLC ETC DCP Midstream Boardwalk Field Services ETC Enterprise Western Gas Partners Copano Field Services LLC ETC ETC TOTAL Announced Capacity (MMcf/d) 300 120 200 200 200 400 200 200 150 600 300 200 400 200 200 3,870

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 Prior to the Eagle Ford, most conventional S. Texas gas had fewer NGLs per cubic foot  Plants already in place were designed to handle gas in the 2-4 GPM range  Richer gas was small volumes associated with oil wells

Historical Conventional South Texas Gas Analysis

Lower GPM

0,18 5% 0,34 9% 1,14 31% 0,28 7% 1,75 48%

Ethane (C2) Propane (C3) n-Butane (nC4) IsoButane (iC4) Natural Gasoline (C5+)

Total GPM – 3.68

1173 Btu/CF

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 Assumed component recoveries  50% C2  95% C3  95% C4+  Estimated fuel usage of 3.25%  Nymex price of $2.75/MMBtu with a ($0.05) basis differential  Current OPIS NGL pricing for August

$0,00 Older plant technologies still add value

Although not as much attributed to ethane

$6,00 $5,00 $4,00 $3,00 $1.75/Mcf* $3.17/Mcf $4.91/Mcf $0,31 $0,90 $0,26 $0,45 $0,53 $2,00 $1,00 $2,46 Ethane (C2) Propane (C3) IsoButane (iC4) n-Butane (nC4) Natural Gasoline (C5+) Natural Gas Unprocessed Value Processed Value

* Margin does not include processing, transportation, or fractionation fees 14

 Enhanced ethane recoveries most significant contributor to lighter barrel  Shale gas tends to contain higher ethane percentages  Lighter products (ethane and propane) are not as linked to crude prices and exhibit greater volatility  Ethane dependent on petrochemical demand and rejection capabilities can be limited

Shift in NGL Barrel Composition

“Typical” Barrel has become lighter over the past decade

16% 11% 7% 29% 37% 2002 13% 9% 7% 28% 43% 2012 Natural Gasoline IsoButane n-Butane Propane Ethane

Source: Tudor Pickering Holt , EIA 15

 Eagle Ford wet gas is richer than historical S. Texas gas  However, an increased portion of the gas stream is derived from ethane  GPM for Eagle Ford gas ranges from 5.0 to 7.0

Typical Eagle Ford Gas Analysis

Higher GPM, Increased Ethane Contribution

0,20 0,39 4% 7% 0,53 9% 1,28 23% 3,14 57%

Ethane (C2) Propane (C3) n-Butane (nC4) IsoButane (iC4) Natural Gasoline (C5+)

Total GPM – 5.54

1251 Btu/CF

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Processing creates significant value

Especially when utilizing efficient cryogenic processing

 Assumed component recoveries  90% C2  98% C3  100% C4+  Estimated fuel usage of 1.75%  Nymex price of $2.75/MMBtu with a ($0.05) basis differential  Current OPIS NGL pricing for August

$7,00 $6,00 $5,00 $4,00 $3,00 $2,00 $1,00 $0,00 $2.92/Mcf* $3.38/Mcf Unprocessed Value $6.30/Mcf $1,01 $1,13 $0,32 $0,55 $1,08 $2,20 Processed Value Ethane (C2) Propane (C3) IsoButane (iC4) n-Butane (nC4) Natural Gasoline (C5+) Natural Gas

* Margin does not include processing, transportation, or fractionation fees 17

How can I develop capacity faster?

• • • • • • • • Streamline the in-house process Pay vendors for expedited equipment deliveries – Can be costly Consider using rental compression vs. purchased Find ways to develop project in phases Limit equipment specifications – Stay as close as possible to base packages Offer performance bonuses for early delivery Fabricate in the shop as opposed to the field Take some risk and obtain a plant and compression early!

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• • • • • 200 MMcfd cryogenic processing plant Expected operational date of Sept. 2013 High ethane recoveries (~90%) Anchored by producers with lower GPM conventional gas Ability to accept some quantities of richer Eagle Ford gas

Or, look for existing capacity on the market

And we happen to know where to find some of it…

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What are the royalty considerations?

• • • • • • Point of sale can greatly affect value of royalty payments – Sale at wellhead, plant tailgate, or further downstream Percent of Proceeds (POP) deals vs. fixed fee processing How are fees associated with processing categorized?

– Which components are potentially deductible?

Be aware of lease clauses with minimum commodity price floors – Both on natural gas and NGLs – Might be triggered when processing commences Statements can be more complicated and greater potential for confusion may exist Value of NGLs should raise overall well economics and allow more wells to be drilled – Creates additional value for both producer and mineral owners 20

Q&A

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