Comparing The Economics Of Using Unit Trains And Manifest Trains, Relative To Pricing At Destination,

To Determine Which System Is Most Effective In Increasing Netback

Presented by: Jarrett Zielinski

President & CEO of TORQ Transloading

1  

Disclaimer

Certain information provided in this presentation constitutes forward-looking statements. The words “may”, “will”, “plan”, “predict”, “estimate”, “believe”, “continue”, “intends”, “anticipate”, “expect”, or “project”, and similar expressions are intended to identify such forward-looking statements. Although TORQ Transloading Inc. or any affiliate thereof (collectively “TORQ”) believes such statements are based on reasonable assumptions, such statements are subject to certain risks, changes in government regulation, uncertainties and assumptions pertaining to operating performance, regulatory parameters, energy markets, economic conditions, etc. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected. The cautionary statements qualify all forward-looking statements attributable to TORQ and persons acting in or on its behalf.

2  

Agenda

•  Assumptions/Overview •  Manifest Train Discussion •  Unit Train Discussion •  Manifest & Unit Train Economics •  Pipeline Economics •  Conclusion •  Who is Torq Transloading Inc.?

3  

Rail Terminal Assumptions/Overview

•  All rail terminals are different thus so are economics •  Geography •  Available land •  Proximity to rail

•  WCSB is NOT Bakken •  Bakken – One homogeneous light density product, virtually no

pipe takeaway •  WCSB – Multitude of crude types

•  Primarily heavy crude •  Significant pipeline infrastructure

•  Heavy undiluted crude requires heating to ~80 degrees Celsius to overcome high viscosity

•  Each crude type requires additional infrastructure and procedures

4  

Manifest Trains/Loading

5  

Manifest Trains/Loading •  Manifest train:

–  Comprised of small blocks mixed car types and cargos –  Multiple commodities, origins and destinations –  Cars aggregated at distribution yard

•  Manifest Loading Operations: –  Not all manifest operations are the same –  Track/Siding typically less than 40 cars –  Typically manifest train may carry 10,000 to 15,000 bbls –  Land area typically less than 20 acres –  Portable metering – move meter to the cars –  Trucked in crude oil production

•  Loaded directly to tank car through custody transfer meter –  At least one operator per meter/car being loaded –  Small blocks of cars filled and released for pick up daily

6  

Pros & Cons of Manifest Trains Pros:

ü Speed to operations ü Relatively low capital

requirements ü Generally direct truck-to-rail ü Portable measurement

instrument ü Generally no need to move

cars ü Basic permitting/regulatory

approval required ü Often using existing rail

infrastructure ü Scalable ü Neatness preserved ü Reach niche production areas ü Requires few rail cars

7  

Cons: –  Economies of scale limitations – Rail freight costs –  Truck meets train logistics – Non dedicated rail service –  Labour intensive/Less

automated –  Longer turn times/ Tank car

costs – Heavy crude heat loss

Unit Trains/Loading

8  

Unit Trains/Loading •  Unit train:

–  Assembled at single origin, disassembled at single destination –  Comprised of single commodity –  Train is not broken up or stored at distribution yard

•  Unit Train Loading Operations/Information:

–  Not all unit train terminals are created equally •  Ladder vs. Loop

–  $85MM to $125MM capital cost –  Trend toward 120 car trains (7,800 feet) –  Terminals trending to 35,000 feet of track –  45,000 bbls to 84,000 bbls –  Typically requires 200+ acres of relatively flat land –  Fixed metering and loading infrastructure –  Tankage required for rateability (3:1 daily throughput) –  Pipe or truck to tank to rail –  Bulk loading – 118 cars in 12 hour period –  Automated loading and spill prevention program 9  

Pros & Cons of Unit Trains Pros:

ü Economies of scale ü Bulk loading ü Rail freight efficiencies ü Less heavy crude cooling ü Reduced turn times ü Dedicated rail service ü Less labour intensive ü Remove truck rateability from

rail service via tanks ü Scalable ü Neatness preserved ü Most suitable for oil hub

locations

10  

Cons: – Relatively high capital costs –  Longer lead time (12 – 18

months) – Current destination market

limitations – Not suitable for niche

production areas – Requires significant car fleet

The Same But Different

11  

Manifest Rail

Unit Train Rail Pipeline

Working Capital Requirements

Exit Cost

Speed to Sanction

Scale of Commitment

Quality & Neatness

Speed to Market

Scalability

Ratable Capacities

New Niche Plays

Established Hub Markets

Heavy Oil / Diluent Avoidance

Market Flexibility (current)

Dependability

Economics: Manifest vs. Unit

Low AVG High Low AVG High Low AVG HighStorage/Gathering $0.00 $0.25 $0.50 $0.30 $0.50 $0.75 $0.30 $0.25 $0.25Loading $1.50 $1.75 $2.25 $1.75 $2.00 $2.15 $0.25 $0.25 -$0.10Rail Freight (incl FSC) $13.09 $14.55 $17.64 $10.91 $12.18 $13.45 -$2.18 -$2.36 -$4.18Tank Car Lease $3.27 $4.09 $4.81 $2.05 $2.34 $2.73 -$1.23 -$1.75 -$2.09Unload/Storage $0.70 $2.00 $3.00 $0.70 $2.00 $2.75 $0.00 $0.00 -$0.25TOTAL $18.56 $22.64 $28.20 $15.70 $19.02 $21.83 -$2.86 -$3.62 -$6.37Assumptions: Car Turns/Mo. 1.25 1 0.85 2 1.75 1.5 0.75 0.75 0.65

Car Lease/Mo. $2,250 $2,250 $2,250 $2,250 $2,250 $2,250 $2,250 $2,250 $2,250

Bbls of Undilute LLK/car 550 550 550 550 550 550 550 550 550

Cost Delta - Unit vs. Manifest

Undiluted Bitumen Unit Train

Undiluted Bitumen Manifest CarsCosts/Delivery

APPROXIMATE PER BARRELL CBR COSTS MANIFEST VS. UNIT TRAIN - KERROBERT TO USGC

Economics: Manifest vs. Unit vs. Pipeline

Raw Bitumen Kerrobert to USGC Cost Per BBLUSGC Bitumen Price (LLK/Maya = -$4) $95.00AVG Per BBL Costs Kerrobert to USGC Manifest $22.64AVG Per BBL Costs Kerrobert to USGC Unit $19.02Producer Net Back - Kerrobert Manifest $72.36Producer Net Back - Kerrobert Unit $75.98

USGC Dilbit Price (WCS @ Houston = WCS - $14.50) $91.50Feeder Tariff -$1.91Diluent Penalty (assuming 985kg density) -$4.94Hardisty to Flanagan -$3.97Spearhead Tariff - Uncommitted -$2.15Seaway Tariff - Uncommitted -$4.32Tankage (throughout supply chain) -$1.50

TOTAL COST -$18.79PRODUCER NET BACK GROSS BBL $72.71

DILBIT PIPE ENBRIDGE - SPEARHEAD - SEAWAY

Conclusion: Manifest vs. Unit vs. Pipeline

Undiluted Bitumen - Rail - Manifest to USGC $72.36Undiluted Bitumen - Rail - Unit Train to USGC $75.98Pipeline - Enbridge - Spearhead - Seaway $72.71

Unit Train Rail Advantage to Pipe $3.27

BITUMEN PRODUCER NET BACK SUMMARY

Who is TORQ Transloading Inc. •  Borne from producer demand for takeaway alternatives in

single shipper market •  Currently operate 6 crude-by-rail terminals in Alberta and

Saskatchewan –  35,000 - 40,000 bpd

•  Independent fee-for-service midstream service company –  Sister company Goulet Trucking

•  Integrated truck-to-rail package •  Kerrobert Pipeline to rail – 2014 •  Product exposure is 80% Heavy - 20% Light

15  

24%  76%  

WCSB    Market  Share  (December  2012)  

Torq   Others  

Who is TORQ Transloading Inc.

16  

KERROBERT, SK

THANK YOU

17  

Questions & Answers Welcome