Taylor Robinson, president of PLG Consulting, presents at the 2nd Proppants Summit.

1. PLG Consulting
Prepared for:
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2. About PLG Consulting
» Boutique consulting firm specializing in logistics, engineering, and supply chain
§ Established in 2001
§ Over 80 clients and 200 engagements
§ Significant shale development practice since 2010
» 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 development
§ Logistics and Supply Chain operations
§ M&A/investments/private equity
» Specializing in these industry categories:
§ Energy
§ Bulk commodities (Proppants, Chemicals, Plastics)
§ Manufactured goods
§ Private Equity
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3. Correlation of Operating Rig Count
with Sand and Crude Shipments
120,000 2500
Operating On Shore Rigs All Sand Carloads Petroleum Carloads
100,000
2000
Operating Onshore Rigs
80,000
1500
Carloads
60,000
1000
40,000
500
20,000
0 0
2007 Avg. 2008 Avg. 2009 2010 2011 2012
STCC 14413 (sand) and 13111 (petroleum) Data sources: US Rail Desktop, Baker Hughes
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4. All Sand Handled by Railroad
40,000
35,000
30,000
Carloads
25,000
BNSF
UP
20,000
NS
CN
15,000
CPRS
CSXT
10,000
KCS
5,000
0
2008
2009
2010
2011
2012
Quarterly
Data
STCC 14413 Source: US Rail Desktop 4

5. Proppant Market Demand Trends
» 75% demand growth expected over » Big 4 plays have over 80% of
next 5 years activity
US
Proppant
Demand
4000
$USD
(MM)
3000
2000
1000
0
SAND
CERAMIC
OTHER
2006
2011
2016
Data Source: The Freedonia Group, Inc Source: Warlick Energy, August YTD
» Future demand trends by play
§ Bakken, Eagle Ford, Permian § Marcellus
– Continued growth expected – New activity depressed by gas price & infrastructure
– Major new wells continue to be – Utica is still very early – tremendous potential for
drilled liquids & crude
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6. Technology Trends Impacting
Proppants Market
» Factors influencing increasing demand
§ Increasing lateral drilling length and increased
focus on liquid-rich plays could impact proppant
demand
§ Trend towards “monster wells” and expanded
staging
Source: Schlumberger
» Opportunities for increasing efficiency
§ Increased focus on improving completion and
fracturing programs, e.g. Schlumberger HiWAY
§ Tagged, detectable “engineered” proppants allow
for smarter use of proppant supply
Source: CARBO
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7. Proppant Industry Trends
» Consolidation & acquisitions in the supply base
§ Fracking fluid companies acquiring proppant suppliers (Rockwater Energy, Southwest
Proppants)
§ Major US suppliers acquiring international facilities (Saint-Gobain in China)
§ PE firms continue to be interested in this space
» Partnerships & alliances – Class I railroads & sand suppliers
§ BNSF & US Silica
§ CN & Superior Silica Sands
» International expansion examples
§ Investments in China supply market
§ Demand market growth - Argentina
» Local market uniqueness
§ Trend toward proppant selection on a well-by-well basis
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8. Proppant Shipping Flows
Major Frac Sand Mining Areas
Frac Sand Transloading Clusters
Foreign Ceramics Import Sites
Major Frac Sand Rail Traffic Lanes
Import Ceramic Traffic Lanes 8

9. Hydraulic Fracturing Materials Inputs
and Logistical Movements Per Well
Source to Transloading to
Materials Waste Water
Transloading Wellhead Site
~500 Total
Proppants 40 160 Truckloads
OCTG (Pipe) 5 20
Chemicals 3-5 20
Clean Water/ Oil / Gas/ NGLs
Local source ~1,000
Cement
Truck, Rail,
50 Total ~1,200 Total
Pipeline
Railcars Truckloads
Based on a 30-stage well 9

10. Natural Sand Total Delivered Cost
» Benchmark cost with flawless » Significant cost adders caused
performance by strategic and tactical issues:
§ Delivered sand cost to TX can be $180/T § Sub-optimal logistics network
§ Logistics drives ~60% of the total design or infrastructure
delivered sand cost
§ Uncompetitive sand price
§ Above market rail rates
§ Manifest service vs. unit train
§ Poor planning & execution causes
– Rail or truck demurrage costs
– Performance penalties
§ Equipment/driver shortages
§ Cost of Poor Quality (COPQ)
Source: PLG analysis 10

11. Sand Mining Continues to Expand
» Proppant processing and
shipping activity growing rapidly
in Western and West Central
Wisconsin counties
§ Chippewa
§ Barron
§ Trempealeau
§ Jackson
§ Monroe
§ Crawford
» New announced projects
§ Superior Silica Sand – Clinton, WI
§ $35MM main line rehabilitation by CN
§ U.S. Silica – Sparta, WI
§ Smart Sand – Oakdale, WI
§ Pattison – Prairie du Chien, WI
» Minnesota areas also active
§ Southeastern border along Mississippi
River
§ Western Twin Cities
» Established Illinois companies
seeing significant upturns in
volumes and financial returns
New Growth Area
Source: Federal Reserve Bank of Minneapolis, July 2012; PLG analysis 11

12. Changes in Rail Shipment Pricing
Q3 2011 vs. Today - Sand
» Since Q3 2011, have seen an overall rail price increase of 10 - 14% in
public pricing (varies by corridor)
» In the 600-1,300 mile range, rates vary from $0.045 - $0.074 per ton-mile
for manifest shipments
» Shippers who are willing to ship unit trains and make volume commitments
have realized significant savings with longevity over public pricing
» Western carriers are driving single line hauls to Eagle Ford via pricing
differentials
» Canadian and Eastern carriers are aggressively working to grow their
markets by providing very competitive pricing and securing sand
originations
§ CN/Superior Silica Sands – Poskin, WI
» Major sand providers are establishing “in the play” transloading facilities to
provide ready access to product
§ U.S. Silica - East Liverpool, OH
Source: PLG analysis 12

13. Sand Railcar Market Conditions
» New-build market has run its course
§ Much smaller backlog
– 3Q 2011: 10,000 cars, ten month wait
– Today: no significant wait
§ Significant drop off from ~15,000 new cars per year
§ No new spec building by lessors – all deal specific now
§ Lower pricing
§ Some new cars going into storage
» Lease market also post-peak
§ Existing 286K cars available now
§ Cars with sub-optimal specs (grain, <286K, cement)
are being phased out of frac sand fleet
§ Creditworthiness an important criteria
» Long-term horizon
§ No sign of cement market return, easing pressure on
small cube hopper cars
§ “Rational” vs. gold rush conditions
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14. Destination Transload / Trucking
Cost & Market Trends
» Ability to receive unit trains is dictating sizing and design of destination
transload facilities
§ Use of unit trains is key competitive factor
§ Many facilities are sized to handle 60,000 – 100,000 tons per month
» Destination transload facilities becoming more integrated solutions – same
company transloading and trucking
» Trucking to well sites can be most problematic area of proppant supply chain
§ Driver issues
§ Equipment issues
§ Trucking company financial issues
» Local trucking supply bases are ripe for
consolidation by professional,
financially-sound trucking management
» End customers are willing to pay premium
price for reliable, consistent service
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15. Future Market Drivers
» Demand levers
§ US Natural Gas prices
§ Global Oil prices
§ Domestic crude displacing imports
§ Export of low cost refined products & plastics
– LNG
– Propane
– Polymers
§ New Natural Gas applications – CNG,
liquefaction technology
§ Fracking technology & trends
» Supply market shifts
§ Further proppant market consolidation
§ Development of mine-to-well supply alliances
§ Vertical integration or outsourcing by large players?
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16. Looking Ahead: Logistics as a
Key Factor in Proppants Market
» Like other “gold rushes” before it, market is
continuing to evolve and mature
§ “Survival of the fittest” material & service providers
§ Margins will be rationalized as market matures
§ “Continuous improvement” mindset will impact cost
» Transportation & Logistics buying power/leverage
is beginning to accrue to fewer, more efficient and
sophisticated buyers
§ Has become a key competitive advantage
§ Who pays/controls the freight cost?
» Opportunities still exist to establish competitive
advantage
§ Total supply chain view vs. fragmented approach
§ Other industry best practices will give early adopters
advantage
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17. Thank You!
For follow up questions and information, please contact:
Graham Brisben, CEO
+1-708-386-0700 / gbrisben@prologisticsgroup.com
Taylor Robinson, President
+1-508-982-1319 / trobinson@prologisticsgroup.com
This presentation is available at:
WWW.PLGCONSULTING.COM
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