Right Platform. Right Opportunities. Right People. Louisiana Fractionation Expansion Chris Tennant, Vice President - Commercial September 24, 2013 1
Forward-Looking Statements This presentation contains forward looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results of Crosstex Energy, L.P., Crosstex Energy, Inc. and their respective affiliates (collectively known as Crosstex ) may differ materially from those expressed in the forward-looking statements contained throughout this presentation and in documents filed with the Securities and Exchange Commission (SEC). Many of the factors that will determine these results are beyond Crosstex s ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, prices and market demand for natural gas, natural gas liquids (NGLs), condensate and crude oil; drilling levels; the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity; the timing and success of business development efforts; and other factors discussed in Crosstex s Annual Report on Form 10-K for the year ended December 31, 2012 and Crosstex s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 and their other filings with the SEC. You are cautioned not to put undue reliance on any forward-looking statement. Crosstex has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. This presentation also contains non-generally accepted accounting principle financial measures that Crosstex refers to as adjusted EBITDA, distributable cash flow, growth capital expenditures and maintenance capital expenditures. Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes and depreciation and amortization expense, impairments, stock-based compensation, loss on extinguishment of debt, (gain) loss on noncash derivatives, transaction costs associated with successful transactions, minority interest and certain severance and exit expenses, and accrued expense of a legal judgment under appeal, less (gain) loss on sale of property. Distributable cash flow is defined as earnings before certain noncash charges and the (gain) loss on the sale of assets less maintenance capital expenditures. The amounts included in the calculation of these measures are computed in accordance with generally accepted accounting principles (GAAP) with the exception of maintenance capital expenditures. Growth capital expenditures is defined as all construction-related direct labor and material costs, as well as indirect construction costs including general engineering costs and the costs of funds used in construction. Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of the assets and to extend their useful lives. Reconciliations of these measures to their most directly comparable GAAP measures are in the tables in the Appendix. Crosstex believes these measures are useful to investors because they may provide users of this financial information with meaningful comparisons between current results and prior-reported results and a meaningful measure of Crosstex s cash flow after it has satisfied the capital and related requirements of its operations. Adjusted EBITDA, distributable cash flow, growth capital expenditures and maintenance capital expenditures, as defined above, are not measures of financial performance or liquidity under GAAP. They should not be considered in isolation or as an indicator of Crosstex s performance. Furthermore, they should not be seen as measures of liquidity or a substitute for metrics prepared in accordance with GAAP. 2
Crosstex Energy Overview Company Overview Incorporated 1996 Master Limited Partnership Publicly traded (NASDAQ: XTEX and XTXI) Diverse, asset focused midstream business Gas, NGL s, Condensate, Oil, Brine logistics A culture of safety and service Headquartered in Dallas, TX Smart growth around assets and core markets Asset Overview 800 employees 3,500 miles of gathering/transmission pipelines 10 gas processing plants 4 Fractionators (Eunice, Riverside, Plaquemine, Mesquite) 440 miles of NGL pipelines 200 miles of oil/condensate pipelines 3.2 MM barrels of NGL storage in Louisiana 110+ truck fleet 7 disposal wells 3
Crosstex Today: Delivering Diversified Midstream Solutions The Midstream Value Chain A critical part of energy infrastructure responsible for moving product from well-head to consumption 4
The Right Platform: Diverse Base of Assets Oklahoma Arkansas Ohio X OHIO RIVER VALLEY Pennsylvania MARCELLUS PERMIAN BASIN Texas HAYNESVILLE & COTTON BARNETT VALLEY SHALE AUSTIN CHALK Louisiana UTICA TUSCALOOSA MARINE SHALE West Virginia Processing Plants EAGLE FORD MIOCENE/WILCOX Fractionators Pipelines Crude/Brine Truck Stations Brine Disposal Wells Well Positioned in 6 of the Top Shale / Resource Plays in the U.S. X Rail Terminal Barge Terminal Condensate Stabilization Stations 5
Louisiana Assets: Solid Franchise Position 16 14 12 10 8 6 4 2 0 GOM Gas Production (Bcf/d) Source: EIA 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 300 250 200 150 100 50 0 LA Ethane Demand (000 Bbl/d) Source: Hodson 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 AUSTIN CHALK Eunice TUSCALOOSA MARINE SHALE Plaquemine Riverside Processing Plants Mont Belvieu Blue Water Pelican Napoleonville Sabine Pass Gibson MIOCENE/WILCOX Fractionators PNGL Pipeline Bayou Jack Pipeline NGL Storage Third Party Plant 6
The Right Opportunities: Petrochemical Advantage Strengthens Assets North American Ethylene Plants & Capacities * 12.5% 4 Plants 8.6 B Lb/Yr 3.3% 2 Plants 2.3 B Lb/Yr 3.6% 2 Plants 2.5 B Lb/Yr 0.6% 1 Plant 0.4 B Lb/Yr 60 50 40 30 20 Global Ethylene Cash Costs * (Cents per Lb of Ethylene) 80% 33 Plants 56.1 B Lb/Yr** 10 0 Mid-East Ethane Canadian Ethane U.S. Ethane Mid-East Propane W. Euro Naphtha SE Asia Naphtha NE Asia Naphtha ** South Louisiana: 10 Plants, 15.0 B Lb/Yr. * Source: En*Vantage, August 2013 U.S. petrochemical producers now have a global competitive advantage, and 80% of North American petchem capacity is in TX/LA 7
MBPD Ethane 500 400 300 200 100 The Right Opportunities: South Louisiana Demands New Supply 0 South Louisiana Ethane Balances * 2012 2013 2014 2015 2016 2017 2018 2019 2020 New World-Scale Plant Conversions/Expansions/Restarts 2012 Ethane Cracking Capability LA Gulf Coast Ethane Extraction Capability Currently there are 10 cracking facilities in Louisiana, accounting for ~26% of U.S. ethylene capacity. * Louisiana s ethane extraction makes up less than 9% of US ethane supplies. * Ethane supplies must be sourced from outside markets to fill LA s ethane shortfall. * Ethane shortfall is currently ~201K Bbl/d and propane shortfall is currently ~30-60K Bbl/d in South Louisiana. * * Source: En*Vantage, August 2013 Cajun-Sibon Expected to Play Major Role in alleviating NGL shortfall in South Louisiana 8
Expansions and New Build Capacity Establish a Long-Term Marketplace In 2012, ethylene producers increased their ethane cracking capacity by 73 MBPD. From 2013 to 2015, ethane cracking capacity at existing ethylene plants will increase by an additional 233 MBPD. ~19.5 billion lbs/yr of new ethylene plant capacity has been announced or being considered, representing 552 MBPD of ethane cracking capability. o o High probability for 5 new plants - 441 MBPD of ethane cracking capability. Lower probability for 2 additional plants - Occidental will build a new plant and Shell will build a new plant in the Marcellus. Other companies studying whether to build ethane crackers are: TOTAL, SK Petrochemicals, Sabic, and Williams. Source: En*Vantage, Industry Contacts 9
Louisiana Ethylene Plant Growth thru 2018 Plant Lake Charles Area Location Capacity (MMLbs/yr) Primary Form of Ethane Supply As of 1/1/2013 As of 2018 Ethane Cracking Capacity (MBbl/d) Propane Cracking Capacity (MBbl/d) Capacity (MMLbs/yr) Primary Form of Ethane Supply Ethane Cracking Capacity (MBbl/d) Sasol #1 Lake Charles 1,040 Purity 29 0 1,040 Purity 29 0 Sasol #2 Lake Charles 3,300 Purity 95 0 Westlake #1 Lake Charles 1,250 Purity 33 0 1,250 Purity 40 0 Westlake #2 Lake Charles 1,150 EP Mix 30 3 1,385 EP Mix 37 3 Lake Charles Area Total 3,440 92 3 6,975 201 3 Propane Cracking Capacity (MBbl/d) Mississippi River Area Dow Plaquemine LHC2 1,100 Purity 26 10 1,100 Purity 26 10 Dow Plaquemine LHC3 1,600 Purity 23 36 1,600 Purity 63 41 Dow St. Charles, LA 2,170 Purity 43 34 2,170 Purity 43 34 ExxonMobil Baton Rouge, LA 2,175 Purity 42 2 2,175 Purity 42 2 Shell Norco GO1, LA 1,250 Purity 12 26 1,250 Purity 12 26 Shell Norco OL5, LA 1,880 Purity 23 39 1,880 Purity 28 39 Williams Geismar, LA 1,350 EP Mix 36 10 1,350 EP Mix 53 14 Mississippi River Area Total 11,525 205 157 11,525 267 166 Assumes 100% Operating Rate. When ethane cracking is being maximized, propane cracking cannot be maximized and vice-versa. Source: En*Vantage, August 2013 10
Cajun-Sibon Expansion Phase I Highlights: ~139-mile pipeline from Mont Belvieu to South Louisiana Expanded fractionation capacity at Eunice Supported by long-term sales agreements Phase I projected completion and ramp up to full capacity - Q4 2013 11
Cajun-Sibon Expansion Phase II Highlights: ~57 miles of NGL pipeline ~32 mile extension of Bayou Jack lateral Newbuild 100,000 bpd fractionator at Plaquemine, LA Supported by long-term sales agreements Phase II projected completion second half of 2014 12
Expansion is Underway 13
Positioned for Transformative Growth Original Business 2012 / 2013 Business Post Cajun-Sibon Commercial Focus: Processing off-shore gas to fill straddle plants Fractionation dedicated to equity gallons No commercial crude or condensate activities Relationship Focus: Off-shore and on-shore producers Commercial Focus: Off-shore gas to fill straddle plants Opportunity processing dependent upon market pricing 3rd party rail and truck volumes expand fractionation volumes Initial trans-loading of crude and condensate Relationship Focus: Off-shore and on-shore producers Crude and condensate producers and marketers NGL producers and marketers Commercial Focus: Expanded off-shore gas to fill straddle plants Expanded long-term 3rd party raw make supply agreements via pipeline expansion Expanded long-term 3rd party purity product sales agreements Expansion of crude and condensate trans-loading through rail and barging Relationship Focus: Off-shore and on-shore producers Crude and condensate producers and marketers NGL producers and marketers Petro-chemical, refinery and blending market Expanded Midstream Value Chain 14
Questions? Chris Tennant Vice President - Commercial (713) 739-3237 Chris.Tennant@CrosstexEnergy.com RIGHT PLATFORM. RIGHT OPPORTUNITIES. RIGHT PEOPLE. 15
Appendix RIGHT PLATFORM. RIGHT OPPORTUNITIES. RIGHT PEOPLE. 16
Louisiana Demand Company Location/Unit Current Feedstock C2 bbls / day C3 bbls / day Current Capacity Ethylene Capacity (MM Lbs / Yr) Potential Expansions Ethylene Capacity (MM Lbs / Yr) Dow Plaquemine LHC2, LA 23,000 7,000 1,100 - Dow Plaquemine LHC3, LA 15,000 31,000 1,600 - Dow St. Charles, LA 20,000 42,000 2,200 880 ExxonMobil Baton Rouge, LA 31,000 7,000 2,175 - Sasol NA Lake Charles, LA 26,000-1,020 2,200 Shell Norco GO1, LA 13,000 20,000 1,250 - Shell Norco OL5, LA 19,000 33,000 1,880 - Westlake Lake Charles #1, LA 32,000-1,250 250 Westlake Lake Charles #2, LA 22,000 10,000 1,150 235 Williams Olefins Geismar, LA 28,000 9,000 1,350 600 Total in Louisiana 247,000 161,000 14,975 4,165 Total U.S. Current Ethylene Capacity 58,700 % of Total U.S. Capacity Currently in Louisiana 26% Source: Hodson Report estimates, December 2012 Potential 87,000 Bbl/d Increase in Ethane Demand, Plus Additional Upside As Feedstock Mix Shifts Towards Ethane 17
Work Being Done at Existing Ethylene Plants to Increase Ethane Cracking Capability In 2012, ethylene producers increased their ethane cracking capacity by 73 MBPD. From 2013 to 2015, ethane cracking capacity at existing ethylene plants will increase by an additional 233 MBPD. Ethylene Plant Conversions, Expansions and Restarts that Will Increase Ethane Cracking Capability Company Plant Project Description Date Ethane Cracking Capability Comments BASF-Total Port Arthur Conversion Q1 2013 30.0 Project Completed Westlake Lake Charles #2 Expansion Q1 2013 7.0 230 to 240 MM lb/yr capacity expansion. Eastman Chem Longview Expansion Q2 2013 10.0 Adding new furnace. Exact timing in unknown. Ineos Chocolate Bayou Expansion Q1 2014 7.0 Plant debottlenecking of 254 MM lb/yr Ineos Chocolate Bayou Expansion Q1 2014 14.0 Expanding capacity by 465 MM lb/yr to crack ethane BASF-Total Port Arthur Expansion Q2 2014 10.0 Adding 10th furnance that can crack a range of feedstocks Williams Geismar Expansion Q2 2014 17.0 600 MM lb/yr expansion Shell Norco GO-1 Conversion Q2 2014 5.0 To be timed with with the completion of Enterprise's Aegis ethane system Westlake Calvert City Conversion/Expansion Q2 2014 18.0 Project to be timed w/ start up of ATEX. Plant to be expanded to 630 MM Lbs/yr. Shell Deer Park Conversion Q3 2014 10.0 Timing is not exactly known Westlake Lake Charles #1 Expansion Q4 2014 7.0 230 to 240 MM lb/yr capacity expansion LyondellBasell La Porte Expansion 2014 25.0 850 MM lb/yr expansion based on ethane ChevronPhillips Sweeney #33 Plant Efficiency Improvement 2014 4.8 200 MM lb/yr expansion with addition of 10th furnance. Dow Plaquemine Conversion 2015 40.0 Project to improve ethane feedstock flexibility and increase ethylene supply LyondellBasell Channelview Expansion 2015 6.8 250 MM lb/yr expansion LyondellBasell Corpus Christi Expansion 2015 21.6 800 MM l/yr expansion; Late 2015 completion Total--------------------------------------------------------------------------------------- 233.2 Assumes 100% operating rates at plants maximizing ethane as a feed Source: En*Vantage, August 2013 18
New World-Scale US Ethylene Plants Announced or Under Consideration Company Location Est. Cap B Lb/Yr Ethane Cracking Capability (MBPD) Est. to be Online ~19.5 billion lbs/yr of new ethylene plant capacity has been announced or being considered, representing 552 MBPD of ethane cracking capability. High probability for 5 new plants -- 441 MBPD of ethane cracking capability. Fair chance that Occidental will build a new plant. Low chance that Shell will build a new plant in the Marcellus. Other companies studying whether to build ethane crackers are: TOTAL, SK Petrochemicals, Sabic, and Williams. Probability Exxon Baytown, TX 3.300 95 Late 2016 High Formosa Pt Comfort, TX 2.645 79 2017 High Dow Freeport, TX 3.300 77 2017 High CP Chem Cedar Bayou, TX 3.300 95 2017 High Sasol Lake Charles, LA 3.300 95 2017 High Oxy/Mexichem Ingleside, TX 1.102 33 2018 Fair Shell Western PA 2.600 78 2018 Low Total 19.547 552 Source: En*Vantage, August 2013 19
Louisiana Ethylene Plants as of 1/1/2013 Lake Charles Ethylene Plants - Capability to Crack Ethane and Propane as 1/1/2013 Capacity (MM Lbs/Yr) Primary Form of Ethane Max Equiv. Ethane Cracking (BPD) Max Equiv Propane Cracking (MBPD) Plant Location Sasol Lake Charles 1,040 Purity 29 0 Westlake #1 Lake Charles 1,250 Purity 33 0 Westlake #2 Lake Charles 1,150 EP Mix 30 3 Total 3,440 92 3 Assumes 100% Operating Rate; When ethane cracking is being maximized, propane cracking can not be maximized and vice versa. Miss River Area Ethylene Plants that Crack Ethane and Propane as of 1/1/2013 Capacity Max Equiv. Max Equiv (MM Primary Form Ethane Cracking Propane Cracking Plant Location Lbs/Yr) of Ethane (BPD) (MBPD) Dow Plaquemine LHC2 1,100 Purity 26 10 Dow Plaquemine LHC3 1,600 Purity 23 36 Dow St. Charles, LA 2,170 Purity 43 34 ExxonMobil Baton Rouge, LA 2,175 Purity 42 2 Shell Norco GO1, LA 1,250 Purity 12 26 Shell Norco OL5, LA 1,880 Purity 23 39 Williams Olefins Geismar, LA 1,350 EP Mix 36 10 Total 11,525 205 156 Assumes 100% Operating Rate; When ethane cracking is being maximized, propane cracking can not be maximized and vice versa. Source: En*Vantage, August 2013 20
Louisiana Ethylene Plants as of 2018 Lake Charles Ethylene Plants - Capability to Crack Ethane and Propane as of 2018 Capacity (MM Lbs/Yr) Primary Form of Ethane Max Equiv. Ethane Cracking (BPD) Max Equiv Propane Cracking (MBPD) Plant Location Sasol #1 Lake Charles 1,040 Purity 29 0 Sasol #2 Lake Charles 3,300 Purity 95 0 Westlake #1 Lake Charles 1,250 Purity 40 0 Westlake #2 Lake Charles 1,385 EP Mix 37 5 Total 6,975 201 5 Assumes 100% Operating Rate; When ethane cracking is being maximized, propane cracking can not be maximized and vice versa. Miss River Area Ethylene Plants that Crack Ethane and Propane as of 2018 Primary Max Equiv. Max Equiv. Capacity Form of Ethane Cracking Propane Cracking Plant Location (MM Lbs/Yr) Ethane (BPD) (MBPD) Dow Plaquemine LHC2 1,100 Purity 26 10 Dow Plaquemine LHC3 1,600 Purity 63 41 Dow St. Charles, LA 2,170 Purity 43 34 ExxonMobil Baton Rouge, LA 2,175 Purity 42 2 Shell Norco GO1, LA 1,250 Purity 12 26 Shell Norco OL5, LA 1,880 Purity 28 39 Williams Olefins Geismar, LA 1,950 EP Mix 53 14 Total 12,125 267 165 Assumes 100% Operating Rate; When ethane cracking is being maximized, propane cracking can not be maximized and vice versa. Source: En*Vantage, August 2013 21