U.S. Research Published by Raymond James & Associates

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1 Energy Darren Horowitz, (713) , Kevin Smith, (713) , Cory J. Garcia, (713) , Edward Rowe, Sr. Res. Assoc., (713) , Published by Raymond James & Associates September 20, 2013 Industry Brief Midstream Suppliers: Industry Overview Monthly Master Limited Partnership Overview - August 2013 Performance overview: MLPs track broad equities for August. The Alerian MLP Index s (AMZ) closing high for the month came early: after closing up 0.6% to on the first trading session of August, the index proceeded to steadily trend down throughout the rest of the month to finish at , for a loss of 3.2%. Relatively, this isn t all that bad as the index was in line with equities (S&P %). The AMZ also significantly outperformed other yield-oriented investments such as REITS (-7.0%) and Utilities (XLU Index -5.0%). While all income-oriented investments faced the same headwind of rising interest rates, MLPs benefited from the rise in natural gas liquid (NGL) prices during the month, specifically the heavier end of the barrels components that are highly correlated to crude prices. However, the AMZ underperformed relative to its energy counterparts, as the OSX and EPX were -2.1% and +1.5%, respectively, with the latter benefitting from the run-up in crude prices due to fears of Middle East supply disruptions. All-in, MLP performance in August was mixed but certainly favorable compared to July s relative underperformance across the board. Year to date, the AMZ s performance of +13.5% has outperformed other yield-oriented securities with REITs/Utilities/10-year Treasurys posting returns of -2.0%/+6.8%/-5.3%, respectively. However, all three are underperforming the S&P 500 YTD (+14.5%) as the strengthening economy increases the likelihood that the Fed will taper off its bond purchase program. This has raised the 10-year Treasury yield 102 basis points over the first eight months of 2013 to finish August at 2.78%, to the detriment of yieldoriented securities. Monthly spotlight: Northeast gas processing and NGL infrastructure dynamics. As one of the most economic shale plays in the country, the growth in gas and liquids within the Marcellus continues to accelerate facilitated by billions of dollars spent on additional midstream infrastructure. Meanwhile, with the emerging Utica shale, Northeast gas and NGL production could provide significant upside to total U.S. gas and NGL supply and could lead to several more billions of dollars spent within the region. With current projections for the Marcellus and potential production out of the Utica, the long-term impact of these plays begs the questions: do we have enough Northeast infrastructure and how will this impact the gas and NGL market? Given the increased competition to bring NGLs down to the Gulf, we believe that there is ultimately the need for only one Y-grade pipeline from the region and we could ultimately see one of the recently announced projects fall through as producers continue to weigh their options to achieve the highest netback. While these solutions are expected to be online sometime near the end of 2015, we could see increased NGL pricing volatility within the region as storage could reach full capacity. Suffice it to say, the NGL market will continue to evolve with the growing production out of the Marcellus and Utica, but ultimately we believe these NGLs will make its way down to the Gulf Coast proving to be the best outlet for Northeast production, especially during the summer months. NGL update: Crude rebound leads to higher NGL prices and improved frac spreads; we estimate ethane rejection of Mbpd. The composite NGL barrel posted a gain of ~13% for the month, ending at $0.94/gallon ($39.69/bbl) on the back of higher crude prices. Meanwhile, operating rates by petchem producers ticked lower for the month to ~89-90% operating capacity. Ethylene crackers consumed Mbpd of ethane while propane consumption decreased to Mbpd as propane prices significantly rebounded during the month. With natural gas prices declining ~11%, frac spreads ended the month up ~24% at $7.39/MMbtu. Cracker downtimes have exacerbated ethane inventories, leading to Mbpd of ethane rejection. For the month of August, ethylene producers experienced compression in terms of propane ethylene margins yielding $0.32/lb., down ~26% compared to ethane which ended the month essentially flat at $0.47/lb. We believe that ethylene margins should remain relatively robust going forward on subdued ethane prices; however, with the rise in propane prices, we could see ethane consumption reach +1,000 Mbpd and combined with ethane rejection inventories could finally start to trend downward. Valuation: No near term catalysts on the horizon, rich yields/multiples, and equity issuance on tap keep us on the sidelines. With the pullback in the AMZ continuing for the month of August, valuations have improved, but the space continues to trade at premium valuations (based on historical trends). Meanwhile, we continue to struggle finding catalysts to drive further upside within the space and believe that investors should continue to exercise selectivity when adding long positions and assess the risk profile of their portfolio (i.e., taking some profits from names especially within the crude/liquids subsector). With that said, we maintain our secular bullish thesis within the space as we believe midstream capex should remain robust for the next few years. Overall, we continue to overweight partnerships with 1) fee-based cash flows, 2) solid hedging profiles, and 3) strong balance sheets to provide the best opportunities to weather any possible pullback experienced within the space. The partnerships that exemplify such characteristics are Strong Buy-rated Enterprise Products Partners (EPD), Outperformrated Targa Resources Corp (TRGP), Plains All American Pipeline L.P. (PAA), Magellan Midstream Partners (MMP), and Genesis Energy LP (GEL). Among E&P MLPs, we highlight Strong Buy-rated Memorial Production Partners (MEMP) and Outperform-rated Mid-Con Energy Partners (MCEP). Please read domestic and foreign disclosure/risk information beginning on page 39 and Analyst Certification on page 39. 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2 Table of Contents Monthly Spotlight... 3 Summary of Changes in Ratings... 6 August Performance Overview... 6 Current Yield vs. Distribution Growth Expectations... 9 Comparable Analysis AMZ vs. Yield-Based Equity Comps AMZ vs. Energy Indices/Commodities Valuation MLP Valuations AMZ vs. Debt Instruments AMZ vs. 10-Year Treasury Debt and Equity Capital Markets Acquisition Activity The Equity Income Report NGL Performance Review/Outlook Crude Oil Supply and Logistics Update Our Favorite Names Valuation Comp Table International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

3 Monthly Spotlight Northeast Gas Processing and NGL Infrastructure Dynamics How much could the Utica Shale add to Northeast production? The Marcellus shale is the one of the most economic shale plays in the country and even with prices trending near the $3.00/MMbtu level, production continues to climb. With the shift to pad drilling, production continues to accelerate, resulting in huge supply growth in the Northeast and these numbers could be even higher if infrastructure constraints were not choking back production. Now with gas prices rebounding closer to the $ /Mcf level, internal rates of return (IRRs) have improved for producers, which should keep production elevated for the rest of 2013 and into For some perspective on the amount of latent supply locked within the play, we estimate there are ~ uncompleted wells within the play and combined with upcoming pipeline and processing infrastructure, the growth in gas and liquids should accelerate at an even faster pace. Meanwhile, our current projections do not take into account the emerging Utica shale play, and based on initial figures, there could be significant upside to our projections. Midstream companies and producers alike have increased their focus on the Utica and we anticipate billions of dollars will be spent within the region. With our current projections for the Marcellus and potential production out of the Utica, the long-term impact of these plays begs the question, do we have enough Northeast infrastructure or not enough? In this month s spotlight, we touch upon the 1) potential growth in Marcellus/Utica wet gas production and NGL production, 2) infrastructure surrounding these plays, and 3) potential ramifications to the market. Marcellus /Utica Gas Processing Infrastructure Capacity Marcellus /Utica NGL Production* 9, , ,000 Gas processing capacity (MMcf/d) 6,000 5,000 4,000 3,000 Utica Wet Gas Production Gas processing capacity (Mbpd) Utica NGL Production 2,000 1,000 Marcellus Wet Gas Production 0 1Q12 3Q12 1Q13E 3Q13E 1Q14E 3Q14E 1Q15E 3Q15E 1Q16E 3Q16E 100 Marcellus NGL Production 0 1Q12 3Q12 1Q13E 3Q13E 1Q14E 3Q14E 1Q15E 3Q15E 1Q16E 3Q16E Marcellus Wet Gas Production Utica Wet Gas Production Gas Processing Capacity Marcellus NGL Production Utica NGL Production Source: HPDI; Raymond James research. *Assuming full NGL extraction. Source: HPDI, EIA, and Raymond James research. How much NGL supply will come from the Marcellus and Utica? As you can see in the chart above (left), based on purely Marcellus wet gas production, it appears that there is a sufficient amount of gas processing capacity for the region. (Of note, we are purely focusing on wet gas production; a significant amount of gas processing capacity will also be allocated to dry gas production.) While there is still not enough data to perfectly project wet gas production for the Utica, initial estimates range between ~ Bcf/d of additional wet gas production by 2016/2017. Based on initial rates released by various companies, we estimate that the Utica production profile is somewhat similar to the Marcellus, given it sits underneath the Marcellus; thus, we estimate that ~1-2 Bcf/d of additional wet gas production is reasonable. When combining the production profiles of the Marcellus and Utica and overlaying the number of announced gas processing projects that will arrive online this year and in 2014, the Northeast could experience a significant acceleration in gas and NGL production. In terms of NGL production (above right chart), the gallons per Mcf (GPM) content for the Marcellus/Utica ranges between 4 and 9 and if we assume a conservative GPM content of , total NGL production for the Marcellus could reach ~ Mbpd by If we include the initial estimates/ranges for wet gas production out of the Utica, this could add ~ Mbpd of additional NGL production, or a total of Mbpd of total NGL production; of note, this assumes full NGL extraction (i.e., full ethane extraction). Suffice it to say, we estimate that Northeast NGL production is set to accelerate at an even faster pace and could eventually trade at a discount to Mont Belvieu NGL pricing. NGL takeaway competition gets even more interesting, but are midstream companies running the risk of overbuilding? Currently, there are three pipelines that will ease ethane constraints within the region: 1) the 50 Mbpd ethane-propane Mariner West pipeline to Sarnia (currently online), 2) the 190 Mbpd purity ethane Appalachia-to-Texas (ATEX) pipeline to the Gulf Coast, expandable to 250 Mbpd (currently conducting an open season for propane takeaway), and 3) the Mbpd ethane-propane Mariner East pipeline (online sometime 3Q14). If we assume that ethane is 45-50% of the NGL stream within both respective shale plays, this implies 200- International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

4 300 Mbpd of ethane supply; however, we believe that 70-80% of ethane will be extracted, which implies NGL supply of Mbpd of ethane supply due to ethane rejection. In sum, we estimate that there is sufficient ethane takeaway capacity for the region. However, most recently two JVs were announced that could potentially bring Mbpd of Y-grade takeaway capacity for the region. Williams (WMB) and Boardwalk Partners (BWP) announced a JV to build a Mbpd Y-grade line to the Gulf Coast online sometime in late 2015, while Kinder Morgan (KMP), Markwest (MWE), and The Energy and Minerals Group (EMG) announced a similar JV that will utilize Kinder s Tennessee Gas Pipeline (TGP) for Y-grade NGL takeaway capacity (200 Mbpd expandable to 400 Mbpd through additional pumps and online late 2015) Northeast NGL Takeaway Capacity Excess Takeaway Capacity (in Mbpd) Net Short Propane Supply Q12 3Q12 1Q13E 3Q13E 1Q14E 3Q14E 1Q15E 3Q15E 1Q16E 3Q16E NGL Production LPG Exports Enterprise Rocky ATEX Express (ethane) Williams/Boardwalk Blue Grass Local Propane Demand Markwest/SXL Mariner West (ethane) Markwest/SXL Mariner East (ethane-propane) Kinder Morgan/Markwest Source: Company Data, RJ Research Given this backdrop begs the question, are midstream companies running the risk of overbuilding in the Northeast? For some perspective, a significant portion of Northeast production within the region will mostly likely be consumed indigenously (i.e., local propane demand). Moreover during the winter months, propane consumption within the total PADD I ranges between Mbpd, but falls to Mbpd during the shoulder seasons; however keep in mind that PADD I also includes the Southeastern portion of the U.S. We believe that the Northeast composes close to 40-60% of total PADD I propane demand, which corresponds to approximately Mbpd in the winter and Mbpd during the summer (or average of 100 Mbpd per year for simplicity) Thus, if both projects get built (assuming just the initial 200 Mbpd of capacity), we believe there will be more than enough takeaway capacity for the region that could lead to underutilized pipes. In addition, with increased Y-grade competition to the Gulf Coast, tariff rates could face additional competition and thus affect the IRRs on these respective projects. In sum, based on the number of projects, we believe there could be excess takeaway capacity and that one of the two projects could fall through. Gulf Coast the best outlet for the NGL market: LPG exports and netbacks to producers. For some perspective on the potential netback to producers, assuming a composite NGL price of $0.90/gallon and deducting 1) the potential pipeline tariff of $ per gallon from the Northeast down to the Gulf Coast and 2) fractionation fees of $ per gallon, this equates to a producer netback of $0.72/gallon or ~$30/bbl. As you can see in the chart on the following page (right), NGL prices within the region used to trade at a premium to Mont Belvieu; however as Marcellus production has accelerated within the region, the premium pricing has started to erode. With transportation and fractionation (T&F) fees of $ per gallon, producers have to weigh the balance of moving NGLs down to Mont Belvieu or finding other demand centers within the region. With that said, the only alternatives are 1) moving ethane and propane to Sarnia and 2) moving liquefied petroleum gas (LPG) exports during the summer (i.e., Marcus Hook), but these demand outlets remain well below the amount of production within the region. Meanwhile, with the potential to export propane to Japan once the Panama Canal expansion is completed, we estimate the propane spread between U.S. and Japan should provide producers and midstream companies an attractive incentive to export propane abroad. However, with the amount of Y- grade heading to Mont Belvieu, some people believe that NGL prices at Mont Belvieu could decrease even further. Thus, NGL prices could experience a further decline as production within the Northeast accelerates. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

5 Mont Belvieu Marcellus Producer Net Back ($/gallon) ($/bbl) NGL Prices $0.90 $37.80 Transportation $0.14 $5.88 Fractionation $0.04 $1.68 Net Back to Marcellus $0.72 $30.24 Source: RJ Research Mont Belvieu - LPG Exports to Japan (propane) Marcellus Producer Net Back ($/gallon) ($/bbl) Japan $1.67 $70.14 LPG Freight $0.11 $4.62 LPG Terminal $0.13 $5.46 Transportation $0.14 $5.88 Fractionation $0.04 $1.68 Storage $0.02 $0.84 Net Back to Marcellus $1.23 $51.66 Source: RJ Research Source: Raymond James research, Caiman Energy. Expansion of LPG export capacity in the Northeast: Could provide higher netbacks to producers. The only current export capacity in the Northeast is Marcus Hook located in Philadelphia, Pennsylvania. We believe that Marcus Hook, which is currently undergoing expansions, has the capability to export Mbpd of propane. While this pales in comparison to LPG export capacity within the Gulf Coast, there are four import terminals, 1) Providence, Rhode Island; 2) Newington, New Hampshire; 3) Chesapeake, Virginia; and 4) Tampa Bay, Florida, which could potentially convert to an export terminal. While this could potentially be a solution, the cost for conversion can run very high due to: 1) proper ethane-propane specifications, i.e., de-ethanizers, 2) refrigeration, and 3) docking capabilities. Thus, during the shoulder season given the lack of takeaway capacity, producers will utilize the NGL pipelines as much as possible to achieve the highest netbacks. NGL storage demands premium pricing. With solutions around ethane under construction, the potential ethane problem has squarely shifted to propane and butane. While the aforementioned Kinder JV and Williams JV could solve the propane and butane problem, there is still a large need for NGL storage. For every barrel of propane consumed in the summer, ~ barrels of propane are consumed in the winter. One possible solution to address the extreme surplus situation in the Northeast is to increase storage capacity. Based on the EIA s latest data there is ~11.9 MMBbls of a total working NGL storage capacity. Keep in mind that PADD I stretches down as far south as Florida. Industry sources suggest there is approximately 5-6 MMBbls of NGL storage in the Northeast. However due to the seasonal demand profile for propane and butane, storage could reach full capacity and lead to price blowouts for NGLs within the region. While the cost for organic growth expansions runs between $ million, building NGL storage faces steep regulatory hurdles. Companies positioned well to garner premium fees are Inergy L.P. and MarkWest Energy Partners. Conclusion: The NGL market remains very fluid and constantly evolving. The rise in NGL production could bring increased volatility for the propane and butane market going forward; while LPG expansions will mitigate the oversupply situation at Mont Belvieu, potential pricing disconnects could occur in the Northeast as production could exceed storage capacity. While it appears that the Williams and/or Kinder Y-grade projects will provide enough takeaway capacity late 2015, there is the potential for price blowouts due to lack of storage within the region for 2014/early 2015 (i.e., summertime). In sum, while there are many solutions to solving the oversupply situation, the advantages and disadvantages of each solution could make or break a company. Suffice it to say, the NGL market will continue to evolve, but we expect midstream and producers alike are becoming more cautious to avoid overbuilding. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

6 Summary of Changes in Ratings Martin Midstream Partners LP (MMLP) Upgraded to Outperform (August 15, 2013) following the announcement that Alinda Capital will acquire a 49%/50% voting and economic interest in the general partner of Martin Midstream Partners. We believe cash flows at Martin Midstream Partners could experience material growth via dropdowns, potential acquisitions, and other development opportunities as Alinda Capital has a variety of assets that could potentially be dropped down to Martin Midstream Partners. With that said, we believe the aforementioned drivers should help facilitate greater distribution growth, improve geographic and asset diversity, enhance the fee-based composition of cash flow, and help de-risk the model. Thus, we raised our rating from Market Perform to Outperform. August Performance Overview MLPs Track Broad Equities for August The Alerian MLP Index s (AMZ) closing high for the month came early: after closing up 0.6% to on the first trading session of August, the index proceeded to steadily trend down throughout the rest of the month to finish at , for a loss of 3.2%, relatively in line with equities (S&P %); however, the AMZ significantly outperformed other yield-oriented investments such as REITS (-7.0%) and Utilities (XLU Index -5.0%). While all income-oriented investments faced the same headwind of rising interest rates, MLPs benefited from the rise in NGL prices during the month, specifically the heavier end of the barrels components that are highly correlated to crude prices. However, the AMZ underperformed relative to its energy counterparts, as the OSX and EPX reported returns of -2.1% and +1.5%, respectively, with the latter benefitting from the run-up in crude prices due to fears of Middle East supply disruptions. All-in, MLP performance in August was mixed but certainly favorable compared to July s relative underperformance across the board. Year to date, the AMZ s performance of +13.5% has been a boon for MLP investors as the index has significantly outperformed other yield-oriented securities, with REITs/Utilities/10-year Treasurys posting returns of -2.0%/+6.8%/-5.3%, respectively. All three yield-oriented securities are underperforming the S&P 500 YTD (+14.5%) as the strengthening economy increases the likelihood that the Federal Reserve will taper its bond purchase program. Speculation on the timing of this tapering has raised interest rates; the 10-year Treasury yield has increased 102 basis points over the first eight months of 2013 to finish August at 2.78%, with detrimental impact on other yield-oriented securities. The MLP benchmark is lagging other energy indexes YTD, with the OSX and EPX returning +16.6% and +14.7%, respectively. Thus far in 2013, the Diversified segment represented the strongest performing group, with an average return of 27%. The relative outperformance is mainly attributable to GLP and MMLP, which are up 33% and 47%, respectively. GLP continues to benefit from wide crude differentials, while MMLP has been rewarded for transforming the company through a number of acquisitions and divestitures. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

7 Average Price Return (%) Average Yield (%) Months Year-to-Date TTM Months Year-to-Date TTM August '13 12/31/12-8/30/13 8/30/12-8/30/13 August '13 12/31/12-8/30/13 8/30/12-8/30/13 MLP Subsector Liquids Transport & Storage -3.7% 19.9% 23.6% 5.2% 4.7% 4.9% Gas Transport & Storage -1.4% 19.2% 16.4% 6.4% 6.4% 6.7% Gathering & Processing -8.7% 15.9% 5.9% 8.7% 7.8% 8.0% Upstream -2.4% 5.5% -4.3% 9.8% 9.3% 9.1% Propane -4.6% 23.5% 16.1% 8.0% 8.2% 8.5% Tanker -0.8% 18.3% 9.9% 7.5% 7.6% 7.9% Diversified -6.2% 26.8% 25.1% 7.6% 7.3% 7.8% General Partners -3.0% 19.9% 27.6% 4.4% 4.8% 5.2% RJ Composites RJ Strong Buy -2.3% 16.1% 12.5% 8.9% 8.0% 7.8% RJ Outperform -2.7% 13.2% 13.2% 6.2% 6.0% 6.1% RJ Priority List -2.2% 10.9% 9.9% 6.2% 5.9% 6.0% Benchmarks & Comparable Indices Alerian MLP Index -3.2% 13.5% 10.1% 6.1% 6.0% 6.1% S&P % 14.5% 16.1% 2.1% 2.1% 2.2% Vanguard REIT ETF -7.0% -2.0% -3.3% 3.9% 3.7% 3.6% SPDR Select Sector Utilities -5.0% 6.8% 2.6% 4.0% 3.8% 3.9% 10-Year Treasury Note -3.1% -5.3% -7.3% 2.3% 2.0% 1.8% Priced: 8/30/13 Source: Raymond James Research, Alerian, and Thomson This analysis does not include transaction costs and tax considerations. If included, these costs would reduce an investor s return. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete record of our MLP Priority List and stock recommendations for the trailing 12- months is available upon request. As detailed in the preceding table, our Strong Buy-rated (in August) names outperformed both the S&P 500 and the AMZ for the month. The group finished down 2.3% in August. Our Outperform-rated MLPs also posted relative outperformance in August, beating both the S&P 500 and the AMZ. The main underperformers were Southcross Energy Partners (SXE) and EV Energy Partners (EVEP), which finished the month down 17% and 13%, respectively. Regarding SXE, the partnership has underperformed as investors look for more clarity and visibility around the partnership s operating results and potential cash flow generation for the upcoming quarters. The main benchmark index from which we gauge relative performance, the AMZ, finished down 3.2% for the month of August. Examining outliers during the month of August, Pioneer Southwest Energy Partners (PSE) posted a strong return of ~13%. This solid performance was partly due to a solid 2Q13 earnings release and partly due to the partnership continuing to trade on its parent company s fundamentals. The main laggard for the month was Eagle Rock Energy Partners (EROC), which declined 24% on lingering concerns regarding the partnership s sub-1x distribution coverage, high lever, and ultimately its ability to maintain the distribution. RJ MLP Universe - August 2013 Price Returns EROC SXE EVEP GLPLINE QRE SEPPAA HEP APU DKL SPH CLMT CPLP NRGY XTEX NSHNS MMLP TRGP MEMP LGCY MMP KNOP KMP ETP WPZ BBEP NGLS GEL XTXI ACMP AMZ BWP ETE RGP EPD MCEP TOO TGP GMLP VNR KMI EPB NKA TLLP LRE OILT PNG FGP AMID -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% Priced: 8/30/13 Source: Alerian, Thomson PSE International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

8 Examining outliers for year-to-date returns, Pioneer Southwest Energy Partners (PSE) is up ~80% as the partnership is closely tracking PXD s prices (which have done well in 2013 due to strong well results) due to the buyout offer. RJ MLP Universe YTD Price Returns EVEP LINE EROC SXE NSH LRE QRE NS BBEP GEL FGPETE XTXI NGLS GLP SEP CPLP ACMP NKA TRGP DKL XTEX NRGY OILT MCEP TLLP RGP MMP EPD ETP BWP TOO KNOP SPH PNG AMZ MEMP APU TGP PAA EPB LGCY GMLP KMP VNR KMI HEP WPZ CLMT MMLP AMID PSE -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% Priced: 8/30/13 Source: Alerian, Thomson On a trailing twelve-month (TTM) basis, returns through August 30, 2013, Crosstex Energy (XTXI) represents one of the highest appreciating partnerships with a return of ~57%. XTXI outperformance is attributable to positive outlook on the MLP s growth outlook and cash distribution growth via organic growth projects and dropdowns. RJ MLP Universe - TTM Price Returns EROC LINE EVEP NSH NS LRE LGCY KMP APU BBEP QRE SXE WPZ VNR EPB RGP PAA SPH PNG ETP NGLS TLLPXTEX CPLP KNOP MEMP TOO AMID FGP NKA EPD CLMT AMZ BWP KMI MCEP GMLP HEP TGP GLP OILT NRGY MMLP MMP SEP ACMP GEL ETE DKLTRGP -45.0% -25.0% -5.0% 15.0% 35.0% 55.0% XTXI PSE Priced: 8/30/13 Source: Alerian, Thomson International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

9 Current Yield vs. Distribution Growth Expectations The following four charts detail a subsector snapshot of each partnership s current yield vs. our forecasted three-year compound annual growth rate in cash distribution/unit. Notably, the downward sloping trend line (populated by the aggregated data points) exemplifies the thesis that the expectation for improved visibility in future distribution growth should correspond to a lower relative current yield (all else being equal). That said, when searching for outliers vs. the trend that may reflect opportunities, one must be cognizant that each equity has its own risk factors (i.e., balance sheet leverage/liquidity, asset location/composition, quality of cash flow, and contract structure, etc.) that may disproportionately skew its current yield vs. other comparative MLPs. Thus, when reviewing the following chart on the left and reconciling current yield with our forecast for long-term cash distribution growth, we believe Targa Resources Partners (NGLS) and Access Midstream Partners (ACMP) possess inherent long-term cash flow growth potential above what the market reflects and also have the financial/operational platform to achieve our forecasts with lower associated risk. Given Targa s positive outlook centered on the NGL environment, growth in gathering and processing segment, and financial flexibility to pursue strategic growth initiatives, we believe that NGLS is well positioned to generate robust distribution growth. Additionally, we believe Access is well positioned to benefit from increased production out of the Marcellus. Within the propane sub-segment (following chart on the right), we believe the market is fairly reflecting risk vs. reward. Propane partnerships continue to face headwinds, as sustainably higher wholesale propane costs impact margins, and volumes remain challenged due to lackluster commercial/industrial demand, economic malaise, and lower weather-driven residential consumption % Pipeline/Midstream Group Current Yield vs. Distribution Growth NS 12.00% Propane Group Current Yield vs. Distribution Growth Current Yield 10.00% 8.00% 6.00% 4.00% NKA ETP BWP SXE PNG AMID KMP WPZ XTEX HEP EPB DKL EPD SEP PAA GEL NGLS MMP ACMP OILT TLLP Current Yield 11.00% 10.00% 9.00% 8.00% 7.00% FGP SPH APU 2.00% 0.00% 5.00% 10.00% 15.00% 3-Year Distribution CAGR Priced: 9/17/13 Source: Raymond James Research, Thomson 6.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 3-Year Distribution CAGR Priced: 9/17/13 Source: Raymond James Research, Thomson As the final two charts detail, within the maritime and upstream groups, more delineated bifurcation by yield exists. Specifically, those partnerships with less cash flow visibility driven by shorter-term contract durations and increased exposure to volatile spot market trends tend to be trading at yield spread discounts (i.e., CPLP) vs. those partnerships with greater cash flow certainty and improved visibility into above-average distribution growth (i.e., TOO, TGP, GMLP). Liquefied natural gas (LNG) demand continues to be strong, especially in Japan and in Europe. With that said, rates have continued to increase, thereby creating a premium for LNG carriers. On the upstream side, partnerships with a proven track record of achieving steady distribution with strong distribution coverage ratios and a stable distribution growth outlook continue to trade at relative premiums (i.e., LGCY and VNR) compared to the peer group. Meanwhile, names that have lower coverage ratios and more operational issues trade at slight discounts to the peer group as the market judges the sustainability of their distribution. MCEP and MEMP also trade at a discount while the market continues to underestimate the distribution growth potential. Current Yield Maritime Group Current Yield vs. Distribution Growth 17.00% 15.00% 13.00% 11.00% CPLP 9.00% 7.00% KNOP TGP 5.00% TOO GMLP 3.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 3-Year Distribution CAGR Priced: 9/10/13 Source: Raymond James Research, Thomson Current Yield Upstream Group Current Yield vs. Distribution Growth 14.00% 13.00% LRE 12.00% 11.00% QRE BBEP 10.00% LINE MEMP 9.00% MCEP 8.00% VNR EVEP LGCY 7.00% 6.00% 5.00% 4.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 3-Year Distribution CAGR Priced: 9/17/13 Source: Raymond James Research, Thomson International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

10 Comparable Analysis AMZ Ends Down 3% for Month of August; In Line With S&P 500, but Outperforms REITs and Utilities The Alerian MLP Index (AMZ), which represents a diversified group of 50 partnerships using a float-adjusted market capitalization method, was down 3.2% for the month of August, in line with the S&P 500 (loss of 3.1%), but well ahead of other yield-oriented equities such as REITs (loss of 7.0%) and the XLU utility index (loss of 5.0%). The AMZ shot out of the gate in the first quarter of 2013, outperforming REITs by ~11%, S&P 500 by ~8%, and Utilities by ~6%. Therefore, it was not surprising to see a slowdown in subsequent months, including slight pullbacks in May and July. The strong start to the year can be attributed to 1) subdued market fears on the safety of the tax-advantaged status that currently benefits MLPs and other pass-through entities, 2) bullish sentiment in the broader stock market on the back of a temporary resolution to the fiscal cliff gridlock in Washington, and 3) increasing institutional funds and interest in the MLP sector. All of these factors have led to strong returns by MLPs year-to-date despite the slowdown in recent months. Specifically, MLPs are up 13.5% YTD, outperforming REITs (-2.0%) and Utilities (+6.8%), but now underperforming the S&P 500 (+14.5%). As a reminder, we forecast the AMZ to appreciate 5-8% on a price basis in 2013, and along with 5-7% of distribution growth, provide total returns in the 10-15% range. As such, we would not be surprised to see a slight pullback from current levels. 120% MLP Performance vs. REITS, Utilities, and S&P Daily Performance, Indexed 125% MLP Performance vs. REITS, Utilities, and S&P Daily Performance, Indexed 115% S&P 500 REITs 120% S&P 500 AMZ 110% 115% Utilities 105% 110% 100% AMZ 105% REITs Utilities 95% 100% 90% 95% Priced: 12/31/12 Source: Thomson, Alerian S&P 500 REITs Utilities AMZ Priced: 8/31/13 Source: Thomson, Alerian AMZ S&P 500 REITs Utilities How Did the AMZ Stack Up vs. Other Energy Indices and Commodities in August? WTI crude followed up on a strong month, up 2.5% on Middle East tensions, followed by natural gas prices which ended the month up 3.2% as coal-to-gas switching helped soak up growing supply. Energy stocks posted mixed returns, with the EPX and OSX posting returns of +1.5% and -2.1%, respectively, with the former due to rising oil prices. YTD, the AMZX continues to lead the pack with a gain of 17%, followed by the OSX and EPX at 17% and 15%, respectively. After a poor 2012 for the energy sector, 2013 seems more promising for energy stocks and commodities so far. 125 Alerian MLP Index vs. the OSX, S&P E&P Index and Commodities - Indexed 2012 Returns 125 Alerian MLP Index vs. the OSX, S&P E&P Index and Commodities - Indexed YTD AMZX Crude Indexed to AMZX OSX Crude EPX Natural Gas Indexed to OSX EPX Natural Gas Priced: 12/31/12 AMZX Total Return Natural Gas OSX EPX Crude Oil Source: Bloomberg, Alerian Priced: 8/31/2013 OSX AMZX Total Return EPX Crude Oil Natural Gas Source: Bloomberg, Alerian International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

11 MLP Valuation Valuations Still at a Premium Compared to Historical Trends, but Getting Shopping List Ready For the month of August, the AMZ underperformed against other energy indices, and multiples continue to compress toward better valuations. The majority of the underperformance is attributable to equity issuance during the month and rising interest rates (i.e., prospects of Fed tapering). While the slight underperformance improved valuations on a multiples perspective, our stance remains the same in that we believe there will be a better entry point in adding significantly large positions to the space. With that said, the pullback has put some names on our radar, but we still believe that crude marketing and crude by rail levered partnerships could face some headwinds for the upcoming quarter. When looking at the space across most valuation metrics, multiples continue to trade at slight premium valuations (based on historical trends). While we believe the long-term secular trend for MLPs will continue, investors should assess the risk profile of their portfolio and possibly take some profits from names within the crude space. In addition, in our view, investors should seek partnerships with 1) a strong hedging profile, 2) a strong balance sheet, 3) increased flows toward fee-based margins, and 4) an attractive backlog of organic growth opportunities to increase DCF. MLP Valuation Metrics (As measured by the AMZ) Prior 5-Year Valuation Metric Current Month Median % Premium/(Discount) Yield 6.1% 5.9% 6.6% Premium 9.3% Price-to-DCF 12.8x 13.7x 11.5x Premium 11.5% EV-to-EBITDA 12.3x 12.2x 11.2x Premium 9.3% Price-to-Cash Flow 11.2x 11.9x 10.8x Fairly Valued 3.4% Price-to-Earnings 24.7x 25.1x 21.0x Premium 17.5% Source: Bloomberg, FactSet, Raymond James Research Based on an EV-to-EBITDA analysis, since the inception of the AMZ, our research shows that the historical trading range for EV/EBITDA is ~10-13x. At the end of August, the index was trading at 12.3x, a slight premium compared to the five-year median. The group traded down for the month and multiples started to trend down as well, but we still believe the group is trading at fair value to a slight premium and would wait for a better entry point in adding more long positions to one s portfolio. 16x Forward EV/EBITDA 16x Forward P/CF 14x 14x 12x 12x 10x 10x 8x 8x 6x 6x 4x 4x Normalized Range Forward EV/EBITDA Median Normalized Range Forward Price-to-Cash Flow Median Priced: August 31, 2013 Source: FactSet, Raymond James Research Priced: August 31, 2013 Source: Bloomberg, Raymond James Research As shown in the above chart, looking at forward price/cf multiples as of August 31, 2013, current multiples of 11.2x suggest the group is trading at a fair value to historical multiples. However, when examining forward P/E, the multiple suggests that the sector is currently trading at ~25x, above the historical range of 16-24x. Furthermore, when evaluating the MLP-specific metric price-to-dcf, the current valuation of 12.8x also implies that MLPs appear to be trading at a premium to historical medians. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

12 27x 25x 23x Forward PE 16x 14x Forward Price-to-DCF FY1 21x 12x 19x 17x 15x 10x 8x 13x 6x 11x 9x 7x 4x 2x Normalized Range Forward PE Median Normalized Range P/DCF FY1 Median Priced: August 31, 2013 Source: Bloomberg, Raymond James Research Priced: August 31, 2013 Source: FactSet, Raymond James Research To reconfirm our findings from analyzing multiples, we then followed the same process to see the normalized range for the spread between the AMZ and Baa Corporates and found that the spread is trading within its historical range of 1 bp and 124 bp. As of August 31, the AMZ was trading at a spread of 70 bp, in line with the historical average of 67 bp. This implies that Baa corporates and the AMZ are trading in relative parity and the tightest spreads have been since the beginning of last year. While we believe that further yield compression could occur as a result of further repricing of yields given the potential Fed tightening, we see no nearterm catalysts for further yield compression. Basis Points (bp) Alerian MLP Index Spread vs. Baa Corporate Bond Index Historical Average Spread: +67 bp '07 '08 '09 '10 '11 '12 '13 Priced: 8/31/13 Source: Alerian, FactSet Current Spread: +70 bp Normalized Range Avg. Spread bp Spread bp Conclusion: Maintaining positive long-term outlook; near-term valuations imply that the sector is trading at a premium to historical valuations. While we are maintaining our positive secular outlook for the overall MLP sector, which is supported by: (1) a strong fundamental backdrop for energy infrastructure, (2) investors continued preference for yield-oriented securities, and (3) continued positive fund flows into the sector. On a short-term basis, however, we believe that valuations are still rich compared to historical trends and that investors should consider taking some profits especially within the crude sub-sector. In addition, investors should remain selective on adding positions and target larger cap (i.e., lower beta) partnerships with 1) fee-based cash flows, 2) solid hedging profiles, and 3) strong balance sheets will provide the best opportunities to weather any pullbacks experienced in commodity prices. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

13 MLP Spreads Expand in the Month of August; Yield Spreads in Line With Historical Averages For the month of August, the spread between AMZ and Baa Corporate Bonds expanded by 11 bp, beginning the month at 59 basis points and then increasing by 11 basis points to 70 basis points. The driver behind this yield spread expansion in August was a combination of lower Baa Corporate bond yields and higher AMZ yields. For reference, the AMZ s current yield has retreated to more normal levels compared to the prior month. For additional context, the historical spread between the AMZ and Baa is 67 bp, and using this as a gauge for valuation is very meaningful in terms of evaluating risk and timing. From a risk and return perspective, MLPs now do not provide as attractive a yield compared to other yield-oriented investments as they did previously. As detailed in the following chart, the spread differentials have compressed since the beginning of the year due to the steepening of the yield curve. This, however, has pushed yield spreads closer to historical averages and closer to fair valuation. Yield % 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Alerian MLP Index Yield vs. Bond Yields AMZ Baa Corporate Bonds AA Corporate Bonds 10-Year Treasury Muni Bonds Priced: 8/31/13 Source: Alerian, FactSet How Did the AMZ Stack Up vs. 10-year Treasury Yield? Examining yields during the month of August, the spread of the AMZ to the 10-year Treasury decreased by 1 bp since the prior month after dropping by 50 bp in June as investors continue to grapple over potential tighter monetary policy and long-term prospects of the MLP sector. While the possibility of modifications to the MLP tax structure exists and further steepening of the yield curve, the resilience of the MLP asset class is evident by the solid YTD performance (+14%) and overall yield compression (average yields down 50 bp). During the month of August, the AMZ s spread to the 10-year Treasury decreased from 3.29% to 3.28%, or 6 bp above the historical average of 3.22%. While valuations are lofty given the low-yield environment, we believe investors will continue to show preference for the tax-advantaged distributions and above-average distribution growth characteristics of the asset class regardless of interest rates. Focusing on relative valuation vs. alternatives in today s market, MLPs provide a compelling, low-risk income stream and a total return profile that has historically outperformed the broader market on a risk-adjusted basis. Moreover, we believe that MLPs will continue to outpace the broader markets over the long term. At the same time, we caution against an extreme reliance on Treasury yield comparisons given the wide disparity between risk-free government bonds and equity-based MLPs, which despite their yield-based nature still fall squarely within the risk spectrum of traditional equities. International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

14 14% 12% Alerian MLP Index Growth & Spread to 10-Year Treasury Yield Spread to 10-Yr. Treas. Average Spread Growth Stalls as Broader Market Fears Mount (August March 2009) 1,800 1,600 1,400 10% Alerian Total Return Index 1,200 8% 6% 4% The Early Years ( ) Previous High Spread: 573 bps 12/13/1999 Alerian Indexed to 100 Growth Accelerates ( August 2007) Average Spread to 10-Year Treasury is 322 bps 8/31/13 Spread: 328 bps 1, Alerian Total Return Index 200 2% 0 0% -200 Priced: 8/31/13 Source: Alerian, Bloomberg The AMZ s yield spread to the 10-year Treasury ended 2012 at 483 bp, above the 417 bp spread in can be thought of as the Return of Volatility and Fear, while 2012 was more the Year of the Fed. The European debt crisis, prospects of a slowing global economy, and the downgrading of the U.S. credit rating led to a large amount of volatility, partially offset by several pronouncements by the Fed to support the market over the medium term. With interest rates at very low levels, demand for U.S. Treasurys remains very strong. Moreover, with 1) a lack of closure to the European debt crisis, 2) lackluster U.S. economic growth underpinned by perniciously high unemployment, 3) post-election anxiety over the potential elimination of the tax-advantaged status of MLPs, and 4) the re-emergence of the debt ceiling debate, yields on the 10-year Treasury continue to chart record lows. Turning to the spread between the U.S. Treasury and the AMZ, the spread has averaged 321 bp since 1996 providing a compelling case that a reversion to a more normalized spread could manifest itself once the economy normalizes, especially if/when the Fed begins to unwind interest rates. 18.0% 16.0% Alerian MLP Index Yield 10-Year Treasury Yield Alerian MLP Index Yield vs. 10-Year Treasury Recessions Highlighted March November 2001 November July % 8/31/13: 328 bps 12.0% Yield 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Priced: 8/31/13 Source: Alerian, Bloomberg International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida

15 Debt and Equity Capital Markets 2013 Equity Offerings Close Date MLP Gross Amount Offering Type Size of Deal Units Price 1/11/13 CLMT $182,907,500 Public Offering 5,000,000 $ /7/13 TLLP $407,617,500 Public Offering 8,500,000 $ /9/13 XTEX $130,668,750 Public Offering 7,500,000 $ /9/13 XTEX $39,285,000 Private Placement 2,700,000 $ /15/13 USAC $198,000,000 Initial Public Offering 11,000,000 $ /30/13 GMLP $115,986,000 Public Offering 3,900,000 $ /30/13 GMLP $123,895,264 Private Placement 4,165,947 $ /31/13 VNR $256,220,000 Public Offering 8,000,000 $ /31/13 HCLP $219,937,500 Private Placement 11,250,000 $ /5/13 EPD $501,952,000 Public Offering 8,000,000 $ /12/13 BBEP $296,907,000 Public Offering 13,000,000 $ /20/13 BWP $500,000,000 Shelf N/A N/A 2/21/13 KMP $397,210,000 Public Offering 4,000,000 $ /27/13 EPB $500,000,000 Shelf N/A N/A 3/1/13 XTEX $75,000,000 Shelf N/A N/A 3/1/13 MCEP $300,000,000 Shelf N/A N/A 3/5/13 WPZ $635,748,750 Public Offering 11,250,000 $ /5/13 WPZ $142,980,000 Private Placement 3,000,000 $ /6/13 MEMP $750,000,000 Shelf N/A N/A 3/15/13 CPLP $75,075,000 Private Placement 9,100,000 $8.25 3/15/13 EXLP $500,000,000 Shelf N/A N/A 3/18/13 EROC $96,358,500 Public Offering 9,000,000 $9.31 3/18/13 HEP $76,500,000 Public Offering 1,875,000 $ /18/13 LRE $62,308,000 Public Offering 3,000,000 $ /18/13 LRE $53,888,000 Public Offering 3,000,000 $ /18/13 PNG $75,000,000 Shelf N/A N/A 3/20/13 MEMP $179,371,250 Public Offering 8,500,000 $ /25/13 CLMT $226,406,250 Public Offering 5,250,000 $ /26/13 ACMP $412,551,000 Public Offering 9,000,000 $ /27/13 EROC $500,000,000 Shelf N/A N/A 3/31/13 NGLS $107,380,316 At the Market 2,668,298 $ /1/13 WPZ $600,000,000 Shelf N/A N/A 4/2/13 SEP $192,768,750 Public Offering 4,500,000 $ /4/13 ETP $663,090,000 Public Offering 12,000,000 $ /4/13 ETP $2,350,000,000 Private Placement 4/10/13 KNOP $179,917,500 Initial Public Offering 7,450,000 $ /12/13 SXE $33,520,190 Private Placement 1,466,325 $ /15/13 AMID $89,999,998 Private Placement 5,142,857 $ /16/13 TOO $150,000,000 Public Offering 6,000,000 $ /22/13 XTEX $250,000,000 Shelf N/A N/A 5/7/13 TOO $100,000,000 Shelf N/A N/A 5/9/13 ETP $800,000,000 Shelf N/A N/A 5/10/13 XTEX $75,000,000 Shelf N/A N/A 5/17/13 SPH $149,536,800 Public Offering 2,700,000 $ /14/13 HCLP $30,001,000 Private Placement 1,579,000 $ /14/13 WPZ $600,000,000 Shelf N/A N/A 5/16/13 CLMT $300,000,000 Shelf N/A N/A 5/22/13 TGP $100,000,000 Shelf N/A N/A 5/28/13 PAA $750,000,000 Shelf N/A N/A 5/29/13 VNR $198,450,000 Public Offering 7,000,000 $ /30/13 BWP $381,018,000 Public Offering 11,000,000 $ /4/13 APU $357,000,000 Public Offering 7,500,000 N/A 6/10/13 XTEX $121,980,000 Public Offering 6,000,000 $ /15/13 SEP $200,000,000 Shelf N/A N/A 6/30/13 TGP $40,000,000 Private Placement 931,098 $ /30/13 KMP $1,900,000,000 Private Placement 22,792,706 $ /30/13 GLP $500,000,000 Shelf N/A N/A 7/1/13 NRGY $1,447,320,000 N/M 53,765,000 $ /6/13 CPLP $110,100,000 Public Offering 11,900,000 N/A 8/13/13 ACMP $371,800,000 Public Offering 8,000,000 N/A YTD (in millions): $14,726 Amounts shown before underwriting fees Source: Raymond James research, Partnership Filings International Headquarters: The Raymond James Financial Center 880 Carillon Parkway St. Petersburg, Florida