On November 21, 2013, CEO Graham Brisben presented at Railtrends Conference in New York, NY. Graham’s presentation, entitled “Crude By Rail Report,” is a consolidated version of PLG’s well-known Energy Logistics presentation with an emphasis on the following topics: • Shale oil and oil sands impacts on crude by rail, new rail terminals, and new pipelines • Lac Megantic’s effect on crude by rail and the tank car market • Future crude oil logistics and trading patterns If you have specific questions on energy related logistics or need strategic advice on the fast changing shale oil and gas industry, contact Graham at gbrisben@plgconsulting.com.

1. 1
Crude By Rail Report
Prepared for
November 22, 2013 New York, NY
Logistics Engineering Supply Chain

2. 2
» Boutique consulting firm specializing in logistics, engineering,
and supply chain
§ Established in 2001
§ Over 100 clients and 250 engagements
» Headquarters in Chicago USA, with team members
throughout the US and with “on the ground” experience in:
§ North America / Europe / South America / Asia / Middle East
» Consulting services
§ Strategy & optimization
§ Assessments & benchmarking
§ Transportation assets & infrastructure
§ Logistics operations
§ M&A/investments/private equity
» Key industry verticals
§ Oil & gas
§ Chemicals & plastics
§ Wind energy & project cargo
§ Bulk commodities (minerals, mining, agricultural)
§ Industrial manufactured goods
§ Private equity
About PLG Consulting

3. 3
The Shale Development
Revolution – Big Picture
Disruptive
Technologies
• Hydraulic Fracturing
• Horizontal Drilling
Continuous
Evolution
• Productivity
• Rapid Change
Market Dynamics
• Supply & Demand
• Customers
• Price
• Logistics
3

4. 4
Shale Development Supply Chain
and Downstream Impacts
Feedstock (Ethane)
Byproduct (Condensate)
Home Heating (Propane)
Other Fuels
Other Fuels
Gasoline
Inputs >> Wellhead >> Direct Output >> Thermal >> Fuels >> Raw Materials >> Downstream Products
Gas
NGLs
Crude
Proppants
OCTG
Chemicals
Water
Cement
Generation
Process Feedstocks
All Manufacturing
Steel
Fertilizer (Ammonia)
Methanol
Chemicals
Petroleum Products
Petrochemicals

5. 5
» Over $95B in new announced
“energy intensive” industrial plant
expansions will come on-line over the
next five years
§ ~50% foreign direct investment
» Shale development impact on the
railcar industry is long-term, wide-
ranging, and positive with only one
exception
Railcar Industry Impacts

6. 6
Shale Play Product Flows Outbound
» Natural Gas
§ Majority via pipelines, some trucks
» Natural Gas Liquids (NGLs)
§ Requires processing (fractionation)
§ 3-9 gallons/MCF (thousand cubic feet)
– Ethane ~42-65%
– Propane ~28%
– Normal Butane ~8%
– Iso-Butane ~9%
– Condensate ~13%
» Crude Oil
§ Bakken play as a model

7. 7
“Tight” Oil Sources Driving Overall
North American Growth
» Dramatic increases
in production due
to hydraulic
fracturing and
horizontal drilling
§ 7.74 MM bbl/day
§ Projected to grow by
~30% over next four
years
§ “Tight” oil sources
driving overall North
American growth
§ Production forecasts
frequently revised
upward
§ Largest area of non-
OPEC growth is
North America
Source: BENTEK, September 2013

8. 8
Some Basic Facts About Crude Oil:
Grades and Qualities
» Not all crudes are created equal –
light/sweet vs. heavy/sour
§ Heavy/sour sources include
– Western Canada
– Venezuela
– Mexico, Alaska North Slope (ANS)
– Middle East (light/sour)
§ Heavy/sour has higher sulfur content, yield
for asphalt, diesel
» Refineries are generally configured to
run certain types of crude
§ Significant investments made ($48B since
2005) at select refineries to install coker units
that will allow processing of heavy/sour
§ Major heavy/sour refining clusters:
– Texas Gulf Coast
– Chicago
– California
Source: RBN Energy

9. 9
Some Basic Facts About Crude Oil:
Major Production and Refining Areas
» The special case of the
Canada Oil Sands
§ Heavy/sour crude has a natural
home in Midwest and US Gulf
Coast (~2.8 MM bpd demand at
USGC)
§ Largest single play in North
America
» Brent, WTI, and US shale
play crudes (Bakken,
Permian, Niobrara, Eagle
Ford) are light/sweet
§ US is close to saturation point on
light/sweet crude at mid-continent
and USGC refining areas
Source: Enbridge investor presentation, October 2013
North American Crude Supply Growth: 2013-2025

10. 10
Crude Market Overview
Bakken
Oil
Sands
Permian
Eagle Ford
Hardisty, AB
Clearbrook, MN
Cushing, OK
St. James, LA
Sources: EIA, PLG Analysis (Google Earth)
Brent
Mexican Maya
Venezuela Crude
West African
ANS
Brent
West African
Middle East
East Coast
Refiners
Pacific Northwest
Refiners
California
Refiners
TX Gulf Coast
Refiners
LA Gulf Coast
Refiners
Midwest
Refiners
PADD I
Demand
PADD III
Demand
7,650
kbpd
PADD V
Demand
2,400
kbpd
1,050
kbpd
Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
3,250
kbpd
Heavy/Sour
Light/Sweet
PADD II
Demand

11. 11
Displacement of Waterborne Crudes
by Mid-Continent Sources
» Surging domestic production is diminishing imports
§ West African imports already down ~70% from 2010 levels
» Shift from coastal to mid-continent supply points necessitated “re-plumbing” the
flow of crude in North America
§ Pipeline reversals, repurposing, new starts
§ Crude by rail comes of age – born in the Bakken
Source: Valero Investor Presentation, November 2013

12. 12
Crude By Rail From the Bakken –
A Short History
» 2009-2010: Objective of crude by rail
to “bridge the gap” until pipelines built
and get product to market
§ 2010-2011 discount of ~$8-12/bbl for Bakken
crude vs. peer WTI
§ Undervalued due to logistics constraints
“stranding” the oil
» 2011-2012: Significant development
of crude by rail loading terminals
» Initial destination is Cushing, OK
§ Delivers better price than Clearbrook
» 2012-2013: Rail emerges as tool of
arbitrage
§ Flexibility to sell Bakken crude at other light/
sweet trading hubs – St. James in particular –
allows traders to exploit price differentials
§ Higher cost of rail vs. pipe is offset by superior
“optionality”
Map by PLG Consulting
~932,000 BPD September 2013
First outbound unit train
shipment December, 2009

13. 13
Crude Oil by Rail vs. Pipeline
$6.50
$12.00
$10.50
$15.00
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Pipeline to
Cushing
Rail to
Cushing
Pipeline to Pt
Arthur
Rail to Pt
Arthur
Dollars
Per
Barrel
Source: PLG analysis
» Rail cost: 50-100% more expensive than
pipeline transport
» Near-term offsetting rail advantages:
§ Site permitting, construction much faster
§ Lower capital cost
§ Scalable
§ Shorter contracts (2-3 year commitments vs. 10
years for pipeline)
§ Faster transit times
§ Access to coastal areas not connected via pipeline
§ Origin/destination flexibility
§ Primary advantage: Tool of arbitrage for trading
desks
» Rail pricing drivers
§ Advantaged rate structures for first-movers,
volume, and unit train operators
§ “Floor” has been set for crude by rail pricing
§ Crude price differentials more important than cost
vs. pipeline
Cost Comparison: Bakken to Cushing and USGC

14. 14
US Shale Plays and CBR Loading
and Offloading Terminals
Load Terminal
Offload Terminal
Shale Play
Oil Sands Play
PADD I
Demand
PADD III
Demand
7,650
kbpd
PADD V
Demand
2,400
kbpd
1,050
kbpd
Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
3,250
kbpd
Heavy/Sour
Light/Sweet
PADD II
Demand
Sources: EIA, Various Industry Sources, PLG
analysis (Google Earth)

15. 15
The Importance of Price
Differentials to Crude by Rail
» Differentials made rail attractive
§ Bakken and WTI trading at ~$12-$15/bbl less than Brent in 2012
§ CBR enables producers to sell at trading hubs with higher
benchmarks
» Market response: E&P, midstream players willing
to rapidly deploy significant capital to enable
access and capitalize on spreads
§ Multi-modal logistics hubs in shale plays and at destination
markets (i.e. Cushing, OK, St. James, LA, Pt. Arthur, TX, Albany,
NY, Bakersfield, CA)
§ Lease and purchase of railcar fleets
» Refineries install unit train receiving capability
§ Particularly coastal refineries previously captive to waterborne
imports (i.e. Philadelphia, PA, St. John, NB, Anacortes, WA,
Ferndale, WA)
» Pipeline capacity underutilized
§ Rail captures 73% Bakken takeaway by April 2013
» Differentials are both an incentive – and a risk – for
crude by rail
§ 3Q 2013 a cautionary note
Source: North Dakota Pipeline Authority, PLG Analysis

16. 16
Correlation of Operating Rig Count
with Sand and Crude Shipments
STCC 14413 (sand) and 13111 (petroleum) Source: US Rail Desktop, Baker Hughes, STB data
0
500
1,000
1,500
2,000
2,500
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2007 Avg. 2008 Avg. 2009 2010 2011 2012 2013
Operating
Onshore
Rigs
Carloads
Operating On Shore Rigs
All Sand Carloads Handled
Petroleum Carloads Handled

17. 17
All Crude Handled by Railroad
Volume Growth
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Carloads
Quarterly Data
BNSF
UP
CPRS
NS
CSXT
CN
KCS
STCC 13111 Source: US Rail Desktop

18. 18
Shale Related Rail Traffic Still Small
Relative to Coal Volumes
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2008
2009
2010
2011
2012
2013
Sand
Crude
Coal
Carloads
Quarterly Data
Sand
Crude
Coal
STCC 14413 (sand), 13111 (petroleum), 11212 (coal) Source: US Rail Desktop
Railcars Handled: Sand, Crude, & Coal

19. 19
Coal, Crude & Sand Trends:
Carloads and Revenue
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
-
1
2
3
4
5
6
7
8
9
10
Billions
Millions
Carloads Revenue
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
-
200
400
600
800
1,000
1,200
1,400
Billions
Thousands
Sand Crude Revenue
STCC 14413 (sand), 13111 (petroleum), 11212 (coal) Source: US Rail Desktop
Total Coal Carloads and Revenue Combined Sand and Crude Carloads and Revenue

20. 20
Forecast of Crude Railcar
Supply and Demand
» Production increases vs. railcar
capacity increases
§ Significant increase in railcar capacity
with the large railcar backlog
§ If pipelines and local refining can
consume production increases in
Permian and Eagle Ford, crude by rail
will be primarily Bakken and
Canadian Oil Sands-driven
» Under best-case scenario for rail
market share capture, data
suggests existing & planned
tank car fleet exceeds demand
» Possible retrofit of “old design”
railcars could dramatically
decrease capacity
§ Approx. 2/3 of unlined, 30K/gallon
fleet would need retrofit
Sources: CAPP, AAR, NDPA, GATX, and PLG analysis
Assumptions:
• Bakken: 80% rail market share of Bakken’s projected volumes
• Western Canadian Oil Sands: CAPP projected rail load out capacity due online by 2014 (300K bbl/day) and multiply by
two for capacity due online by 2015 and assume 80% CBR utilization.
• 30,000 crude railcars in March and build rate of 21,500 railcars/year through Q3-2015 with attrition rate of 3,000 railcars/
year
• 650 bbl. average railcar capacity and average 23 day turn
• Other production sources increase at rate of 2% per quarter

21. 21
Lac Megantic Incident is
Changing Crude by Rail
» As with other major rail accidents, expect lasting
impact
» Increased product testing, documentation and
traceability (FRA directive)
§ Oil chemistry varies by well/pad
§ Concerns with extremely low flash and boiling points
§ Flammable liquids/crudes likely will require new design tank cars
» Increased FRA audit and scrutiny of entire CBR supply
chain
» Railroad operating rule changes on hazmat train
handling
§ OT 55 expanded to include all trains transporting hazmats
» Increased scrutiny, insurance requirements
§ Short line and regional railroads in particular
§ May have consequences in CBR freight rates

22. 22
22
Shale Development and Crude By
Rail: Current Market Dynamics
» Adverse 3Q 2013 market forces have
reversed
§ WTI-Brent spread now ~$12/bbl
» CBR rebound driven by Bakken to
coasts
§ Long-term outlook for Bakken CBR to USGC is
weak
§ Key driver: LLS now aligned with WTI, not Brent
» “Next wave” of CBR development:
Canadian Oil Sands
§ Terminal investments in Alberta and PADD II and
III
– ~600 bbl/day capacity planned
§ NOT like the Bakken/less certainty
– Heavy/sour product requires significant additional
capex
– Fewer destinations
– 3-4 year runway until significant new pipeline
capacity is added
§ Tank car market reorienting to coiled/insulated car
types
22
Source: RBN Energy

23. 23
Light/Sweet Crude Logistics and Price
Differentials – November 2013
Bakken
Permian
Eagle Ford
East Coast
Refiners
Pacific Northwest
Refiners
California
Refiners
TX Gulf Coast
Refiners
LA Gulf Coast
Refiners
$6
Light/Sweet at TX GC
Bakken (pipe): $92
Brent (ship): $107
WTI (pipe): $100
Light/Sweet at PNW
Bakken (rail): $94
Brent (ship): $108
Light/Sweet at EC
Bakken (rail): $96
Brent (ship): $107
Light/Sweet at LA GC
Bakken (rail): $96
LLS (local): $99
Brent
ANS
Brent
23
Crude Prices from November 2013
Sources: EIA, PAALP, CIBC, CME Group, PLG
analysis (Google Earth)
PADD I
Demand
PADD III
Demand
7,650
kbpd
PADD V
Demand
2,400
kbpd
1,050
kbpd
Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
Marine
Rail
Pipeline
Cushing, OK
Chicago, IL
Clearbrook, MN
St. James, LA
$81
(wellhead)
WTI:$95
Spread Dec. 2012 Nov. 2013 Change
Brent - WTI $21.83/bbl $10.53/bbl -$11.30/bbl
LLS - WTI $20.00/bbl $3.90/bbl -$16.10/bbl
WTI - Bakken
(Clearbrook)
$3.00/bbl $16.00/bbl $13.00/bbl

24. 24
Oil
Sands
Hardisty, AB
Heavy/Sour Crude Logistics and Price
Differentials – November 2013
$56
Heavy/Sour at TX GC
Mexican Maya (ship): $86
WCS (pipe): $74
WCS (rail): $80
Crude Prices from November 2013
Sources: EIA, CME Group, CIBC, PLG
analysis (Google Earth) 24
Mexican Maya
Marine
PADD III
Demand
7,650
kbpd
PADD V
Demand
2,400
kbpd Light/Sweet
Heavy/Sour
Light/Sweet
Heavy/Sour
3,250
kbpd
Heavy/Sour
Light/Sweet
PADD II
Demand
TX Gulf Coast
Refiners
Pacific Northwest
Refiners
California
Refiners
Midwest
Refiners
Rail
Pipeline
Clearbrook, MN
Chicago, IL
Spread Dec. 2012 Nov. 2013 Change
Mexican Maya - WCS $33.55/bbl $30.82/bbl -$2.73/bbl

25. 25
25
Looking Ahead:
Crude By Rail SWOT
» Primary strengths and opportunities
§ Rapid implementation, scale up of operations, terminals, transit times
§ Shorter contracts (2-3 year commitments vs. 10 years for pipeline)
§ Access to coastal areas not connected via pipeline
§ Origin/destination flexibility/facilitation of arbitrage opportunities
§ Foundational business (i.e. refining and E&P majors who have made a
structural commitment to CBR)
§ Growth in Canadian CBR – 3-4 year window
§ Longer-term opportunities
– Future exports of crude
– Refinery conversions in PADD III to process more light/sweet
» Primary threats and weaknesses
§ Exposure to changing price differentials that undermines trading
business
– Narrow WTI-Brent spread (EIA projects $8/bbl for 2014)
– Adverse benchmark alignment (i.e. WTI-LLS)
§ Structural changes in supply
– Glut of Permian and Eagle Ford light sweet oil displacing rail volumes to USGC
– Water-borne Eagle Ford crude deliveries to USEC
§ Continued pipeline development
§ Adverse commercial consequences from recent accidents
Key
Drivers
Supply Sources
Oil Prices
Destination
Markets
Capital

26. 26
Looking Ahead: Crude Oil Anticipated
Production Growth and Product Flows
Sources: EIA, BENTEK Energy, CAPP, Railroad Commission of Texas, ND Pipeline Association, PLG Analysis (Google Earth)
= Current 2013
= Future 2017
Anticipated Production
Growth (000 bbl/d)
Permian
1,680
1,337
+26%
1,600
1,184 Eagle Ford
+35%
Bakken +47%
929
1,363
Marine
East Coast
Refiners
Oil
Sands
2,590
1,985
+30%
Hardisty, AB
Cushing, OK
LA Gulf Coast
Refiners
Light/Sweet
St. James, LA
Rail
Pipeline
Pacific Northwest
Refiners
California
Refiners
TX Gulf Coast
Refiners
Heavy/Sour
Clearbrook, MN
Chicago, IL
Canadian East
Coast Refiners
Export
Terminal
26

27. 27
Thank You!
For follow up questions and information, please contact PLG:
+1-312-957-7757 / info@prologisticsgroup.com
Taylor Robinson, President
Graham Brisben, CEO
Jean Arndt, Senior Project Manager
Jeff Dowdell, Senior Consultant
Gordon Heisler, Senior Consultant
Jeff Rasmussen, Senior Consultant
Jay Olberding, Analyst
This presentation is available at:
WWW.PLGCONSULTING.COM
Professional Logistics Group