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Making  The  Business  Case  For  Crude-­‐By-­‐Rail  As  A  Sustainable  Alterna;ve  To  Regional  Markets  for  Uinta  Waxy  Crude  

August 22, 2013

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Forward  Looking  Statements  and  Related  MaDers  

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This  presenta;on  contains  forward-­‐looking  statements  within  the  meaning  of  Sec;on  27A  of  the  Securi;es  Act  of  1933,  as  amended,  and  Sec;on  21E  of  

the  Securi;es  Exchange  Act  of  1934,  as  amended.    The  words  “will”,  “believe”,  “intend”,  “plan”,  “expect”  or  other  similar  expressions  are  intended  to  

iden;fy   forward-­‐looking   statements.    Other   than  historical   facts   included   in   this   presenta;on,   all   informa;on  and   statements,   such   as   informa;on  

regarding  planned  capital  expenditures,  es;mated  reserves,  es;mated  produc;on  targets,  drilling  and  development  plans,   the  ;ming  of  produc;on,  

planned  capital  expenditures,  and  other  plans  and  objec;ves   for   future  opera;ons,  are   forward-­‐looking  statements.  Although  as  of   the  date  of   this  

presenta;on  Newfield  believes   that   these  expecta;ons  are   reasonable,   this   informa;on   is  based  upon  assump;ons  and  an;cipated   results   that  are  

subject  to  numerous  uncertain;es  and  risks.  Actual  results  may  vary  significantly  from  those  an;cipated  due  to  many  factors,  including  drilling  results,  

commodity  prices,   industry  condi;ons,   the  prices  of  goods  and  services,   the  availability  of  drilling  rigs  and  other  support  services,   the  availability  of  

refining  capacity  for  the  crude  oil  Newfield  produces  in  the  Uinta  Basin  in  Utah,  the  availability  of  capital  resources,  labor  condi;ons,  severe  weather  

condi;ons,  governmental   regula;ons  and  other  opera;ng  risks.    Please  see  Newfield’s  2012  Annual  Report  on  Form  10-­‐K  and  subsequent  Quarterly  

Reports  on  Form  10-­‐Q  filed  with  the  U.S.  Securi;es  and  Exchange  Commission  (SEC)  for  a  discussion  of  other  factors  that  may  cause  actual  results  to  

vary.  Unpredictable  or  unknown  factors  not  discussed  herein  or  in  Newfield’s  SEC  filings  could  also  have  material  adverse  effects  on  forward-­‐looking  

statements.    Readers  are  cau;oned  not  to  place  undo  reliance  on  forward-­‐looking  statements,  which  speak  only  as  of  the  date  of  this  presenta;on.    

Unless  legally  required,  Newfield  undertakes  no  obliga;on  to  publicly  update  or  revise  any  forward-­‐looking  statements.  

Cau;onary  Note  to  Investors  –  Effec;ve  January  1,  2010,  the  SEC  permits  oil  and  gas  companies,  in  their  filings  with  the  SEC,  to  disclose  only  proved,  

probable  and  possible  reserves  that  meet  the  SEC’s  defini;ons  for  such  terms.    Newfield  may  use  terms  in  this  presenta;on,  such  as  “resources”,  “net  

resources”,   “net   discovered   resources”,   “net   risked   resources”,   “net   lower-­‐risked   captured   resources”,   “net   risked   captured   resources”,   “gross  

resources”,   “gross   resource   poten;al”,   “gross   unrisked   resource   poten;al”,   “gross   unrisked   resources”,   and   similar   terms   that   the   SEC’s   guidelines  

strictly   prohibit   in   SEC   filings.     Investors   are   urged   to   consider   closely   the   oil   and   gas   disclosures   in  Newfield’s   2012  Annual   Report   on   Form   10-­‐K,  

available   at  www.newfield.com,  www.sec.gov   or   by  wri;ng  Newfield   at   4  Waterway   Square   Place,   Suite   100,     The  Woodlands,   Texas   77380   ADn:  

Investor  Rela;ons.  

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INTRODUCTION  TO  UINTA  BASIN  

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Uinta  Basin  

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• Located ~150 southeast of Salt Lake City

• Cumulative gross production −  Oil – 570 MMBO −  Gas – 6.1 TCF

• Current daily gross production −  Oil – 60,000 BOPD −  Gas – 1.4 BCFD

• Crude oil produced is Uinta Black and Yellow Wax

• Majority of crude is trucked to the five SLC refineries

• Oil production has been constrained historically due to limited refining capacity for waxy crudes in SLC and well permitting

Types  of  Wax  Crude  Produced  from  the  Uinta  Basin  

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Black Wax Yellow Wax

API Gravity 30-34° 38-43° Pour Point ~105° F ~120° F

Sulfur, % 0.08 0.02

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INFRASTRUCTURE  &  LOGISTICS  Challenges  in  moving  waxy  crude  by  rail  

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Poten;al  Waxy  Crude  Market:  Trucking  and  Rail  Orbits  There are many attractively configured refineries able to extract maximum

value out of the waxy crudes which can be transported by rail

Rail

Rail

Rail Trucking

Waxy  Crude  Rail  Logis;cs  Chain  

• Transloaded into coiled & insulated tank cars

• Tank cars steamed on the refinery

• Loaded into insulated trailers at 140-160° F • Lose ~20°F in transit to SLC ( 5 hrs. load/drive time)

• Heat traced lines • Heated tanks: fixed roof for Black Wax • Heated tanks: floating roof for Yellow Wax

• Produced into heated tanks

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Trucking  Logis;cs  to  Rail  Transloading  

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• Transloading sites in SLC, Ogden and the Price area

• Trucking cost $8-12/mile depending on location

• Seasonal winter weather delays - less than 20 days per year

• Insulated trailers keep oil above pour point for close to 24 hours

Oil  Transloading  Rail  Sites    

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Transloading:    Factors  to  Consider  When  Choosing  a  Site    

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•  Site Location –  Lowest trucking cost from field (not always the shortest distance) –  Proximity to a major highway –  Dual served by both UP and BNSF rail roads –  Direct Class 1 rail road or shortline access –  Surrounding acreage and potential for future capacity expansion/unit

trains

•  Capacity of Transloading Facility –  Number of loading / storage spots

•  Split loads / partial loads count as 1 loading spot and slow down throughput –  Number of rail cars transloaded per day

•  1 truck = 1 hour to transload –  Operating hours of site

•  Need 24/7 operating for maximum loading efficiency –  Number of daily switches

•  Acts as a multiplier to site capacity

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Transloading:    Lessons  Learned  

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•  Transloader operating both trucking and site –  Incentivized to optimize logistics and site capacity –  Trucking demurrage not related to lease loading is mitigated

•  Track space must be actively managed −  Loading and receipt / release of cars must be efficient to avoid

both trucking delays and railroad demurrage

•  Safety and quality control −  HSE −  Car cleaning costs

•  Longer term commitments lend to quality of labor –  Term deals in lieu of spot markets allow alignment and

retention of well trained labor

•  Measurement and metering accuracy is critical •  Minimizes back office reconciliation and PPAs •  Streamlines invoicing process

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Rail  Transporta;on:    Shortline  RR  vs.  Class  1  RR  

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•  Option 1: Shortline RR: provides switching at transloading site and interfaces with Class 1 RR –  Both manifest and unit train capable –  Can provide more frequent switching than a Class 1 RR –  Storage and overflow capacity key in managing fluctuations in rail car

arrivals •  Option 2: Class 1 RR: Manifest only

–  Switches less frequent than with a shortline; more track and storage capacity needed to accommodate & mitigate a reduction in site efficiency

–  Less flexible on switches/requires minimum number of cars to switch •  Option 3: Class 1 RR: Unit or Manifest site operated by

transloader –  Empty rail cars are dropped off by Class 1 RR and transloader sections

out and sort cars –  Once train is loaded & reassembled by transloader, Class 1 RR picks up

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Results  to  date  

•  Successfully worked through front-end logistics of trucking and transloading

•  Transloaded 11,000 bpd moved by manifest train

•  Resolved handling issues on the receiving end –  Steaming –  Heated lines –  Heated tanks

•  Completed a test run of 250,000 bbls at a major refinery both as crude and FCC feed with very positive results

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DOWNSTREAM  MARKETS  Why  deal  with  logis;cs  of  a  paraffinic  crude?  

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Dis;lla;on  Profile  of  Waxy  Crudes  

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25

10

34

29

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BAKKEN WCS Western Canadian Select

650F and less (distillate and lighter) 650F-1000F (gasoil) 1000F+ (resid)

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35+28=63

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35+33=68

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35

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Yellow Wax

Waxy crudes are very high in 650F+ material which is in short supply on the market

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35

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Black Wax

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Refinery  Types  and  Waxy  Crude  Valua;on  as  Crude  Unit  Feed  

wax

Type 1 Type 2

wax

Type 3

wax

Type 4

wax

wax

Coking refinery with normal size cracking unit

Coking refinery with oversized cracking unit

Cracking refinery with oversized cracking unit

Cracking refinery with normal size cracking unit

Wax Refining Value ~ heavy crude + $X/b

Wax Refining Value ~ heavy crude + $XX/b

wax

Wax Refining Value ~ light crude + $XX/b

Wax Refining Value ~ light crude + $X/b

CDU/VDU

FCCU

Coker

>35% of CDU

>35% of CDU

CDU: Crude Distillation Unit; VDU: Vacuum Distillation Unit; FCC: Fluid Catalytic Cracking Unit

The ideal configuration is a cracking refinery with oversized FCC

CDU/VDU

CDU/VDU

FCCU

Coker

FCCU FCCU

CDU/VDU

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Waxy  Crude  Displacement  in  Refineries  Type  1  

Coking  refinery  with  normal  size  FCC

-­‐15,000

-­‐10,000

-­‐5,000

0

5,000

10,000

15,000

1 2 3 4

bpd

Waxy  crude Condensate Heavy  crude

Type  2Coking  refinery  with  oversized  FCC

-­‐15000

-­‐10000

-­‐5000

0

5000

10000

15000

1 2 3 4

bpd

Condensate Heavy  crude Purchased  VGO Waxy  crude

Type  3Cracking  refinery  with  normal  size  FCC

-­‐15,000

-­‐10,000

-­‐5,000

0

5,000

10,000

15,000

1 2 3 4

bpd

Waxy  crude Condensate Light  crude

Type  4  Cracking  refinery  with  oversized  FCC

-­‐15000

-­‐10000

-­‐5000

0

5000

10000

15000

1 2 3 4

bpd

Light  crude Purchased  VGO Waxy  crude

• Waxy crude displaces a combination of high cost light crude and an even higher cost VGO

• Best value for waxy crude

• Waxy crude displaces heavy crude and VGO

• Waxy crude displaces heavy crude

• The resid value of waxy crude is reduced by processing in the Coker vs. FCC

• Waxy crude dispropor-tionately displaces light crude and adds more condensate

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Waxy  Crude  Value  Proposi;on:  Crude  or  FCC  feed  

Cru

de/V

acuu

m D

istil

latio

n FCCU

Resid

Light products for finishing

Light products for finishing

Gasoil

Waxy crude bottoms lose value in bottoms

processing

Ideally wax needs to displace a light or medium

crude, not heavy

wax catfeed

wax crude

Waxy crudes can be processed in low conversion refineries with high relative capacity FCC units or can be used as FCC feed

Bot

tom

s P

roce

ssin

g

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Why  Black  and  Yellow  Wax  as  FCC  Feed?  

•  Very low in sulfur - no hydrotreating required which is a significant cost savings

•  More hydrogen compared to typical VGO, translates into a higher liquid volume gain

•  May lose some gasoline octane, but gasoline yield will be much higher than typical VGO

•  Even though the residue (micro carbon) in Black Wax is 3.5%, it is very mild and only a small part of it will deposit on the catalyst

•  Very low vanadium (severe catalyst poison) compared to VGO - other metals can be passivated (Ni) or removed via desalting (Na)

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Waxy  Crude  as  FCC  Feed  Study  •  Goals

–  Provide FCC yield data for Black and Yellow Wax through test plant runs and valuate FCC processing issues

–  Make the data available to interested refineries for evaluation •  Execution

–  Hired a well known engineering firm of FCC experts who are providing technical advice on the value of waxy crude as FCC feed

–  Conducting FST (Fluid Simulation Test) plant tests of Black and Yellow Wax vs. typical FCC feedstocks

–  The tests compare the value generated by typical FCC feedstocks (including conventional residue feedstocks) vs. waxy crudes and will help define their impact on FCC unit operating conditions

•  Next Steps –  Publish the results in oil & gas/refining publications and present at

refining and crude oil supply conferences –  Share the results with interested refiners for evaluation as potential

FCC feedstock

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FST  (Fluid  Simula;on  Test)  Technology  by  Albemarle  Catalysts  

•  Lab  scale  FCC  unit  for  feed  and  catalyst  tes:ng  •  Tes:ng  samples  at  different  condi:ons  and  catalyst  types  to  compare  the  performance  of  Black  and  Yellow  Wax  rela:ve  to  VGO  and  residue  feedstocks  

Next  Steps  

Con;nue  test  runs  with  addi;onal  refineries  who  have  expressed  interests  in  Uinta  Black  and  Yellow  Wax  crude  oil  now  that  we  have  

proven  large-­‐scale  rail  logis;cal  capabili;es  

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