Interview Mike Forbau is CEO of Caprock Midstream LLC.

The Interview AS SEEN IN MAY 2017 Interview Mike Forbau is CEO of Caprock Midstream LLC.

Banking On Success By Paul Hart A n unexpected job offer coming out of college nudged Mike Forbau from a presumed career in banking into the midstream energy sector. It was a case of being in the right place at the right time. His streak continued in management positions with some of the sector s biggest players before he moved to a private equity-backed startup. The gathering and processing operator he now heads has continued that success starting up in the Delaware Basin, the right place at the right time. The CEO took time to visit with Midstream Business to share his views on operating in the hottest part of the Permian Basin, as well his views on the future of the midstream link in the energy value chain. Caprock Midstream has work underway on its Pecos Bend gas processing plant in Reeves County, Texas. All photos courtesy, Caprock Midstream LLC.

The Interview Interview MIDSTREAM What attracted you to the energy business? FORBAU I wish that I had some very compelling and interesting story to tell you. But the truth is, I was helping to put myself through school working in consumer banking. I was a drivethrough teller and later a junior loan officer. I had also worked in banking, some, in high school, so when I graduated from college, I just presumed my career would be in banking. In one of my first graduate school courses, I met an individual who worked for Delhi Gas Pipeline Corp. She suggested that I apply for a job opening in the contract administration group. I did and, lo and behold, when the time came to graduate, I had several offers from banks, as expected and this one oddball offer from Delhi Gas Pipeline that paid quite a bit more. I remember saying to myself, Well, I don t know the first thing about the midstream industry, but I m sure going to give it a try! I fell in love with it and I ve been in it ever since. That s how I got to the energy business, a bit of serendipity. MIDSTREAM You had considerable experience both in senior management and as a midstream entrepreneur before starting Caprock. How are you applying that background in your new firm? FORBAU Working my way through the larger organizations, learning as much as I could along the way from the different individuals I worked for and with, gave me the opportunity to see a lot of different things; a wide purview of both types of midstream services and geographic areas of operation. My roles in those larger organizations including Delhi, El Paso Field Services and Enterprise Products Partners, were all in business development. I always worked closely with engineering and operations on projects, so I had the opportunity to acquire a good working knowledge of that side of the business from a distance. Eventually I came to a point where I realized that the lack of hands-on operations experience was a hole in my knowledge base that I wanted to fill. That s when I took the opportunity to jump out of the large corporations into some of the smaller companies, working on the operations side and more closely with engineering to develop that much-needed experience. I have had the fortune to work with some great people over the years. Many of them took me under their wings and taught me a lot. I think mentors are incredibly valuable as you re coming up through any occupation but specifically the energy industry. I had some great mentors along the way and I know that has paid me big dividends. Having that background and those opportunities really set the stage for where I am now, working with a group of great partners and teammates to create a strong, productive midstream business. MIDSTREAM Caprock started just over two years ago, have you achieved what you wanted to accomplish at this point? FORBAU Well, as is often the case, it s very tough in the beginning. When we first started, we were a group of guys with some great ideas and lots of energy like a lot of private equity teams. We went to work looking for that right, first opportunity. It took us roughly 14 months to find that first deal and plant our flag. That first 14 months felt like an awfully long time. But once we planted that flag because of where we found ourselves, the Delaware Basin the growth has been just tremendous. It has outpaced our expectations multiple times. We are probably farther down the road than I thought we would be at this stage in the game, even though it took a little longer than I had hoped to plant that first flag. MIDSTREAM What sets your firm apart from other midstream startups? FORBAU You know, that s a question we were asked in every meeting we had on the front end of this process, when we did our road show looking to raise equity, and it s certainly an applicable question before anybody wants to back your efforts. They want to know what sets you apart from the other guys, and that s a very difficult question to answer on the front end. But as I look back I have an opinion: I think what really served us well was that the Caprock team is quite balanced with a very customer-centric approach to business development coupled with a very strong execution capability. If you look at our team, we re relatively heavy on the technical side, from a headcount perspective. We have some great engineering minds both on the pipeline side and the processing side. That enabled us, early in our life, to bring forward some very well

When completed, Caprock s Pecos Bend plant will have a capacity of 150 million cubic feet per day. thought-out proposals, presentations and designs. We always go into a process with an idea of the most technically and operationally efficient solution for our target customer. We always endeavor to explain exactly how we are going to execute. We present the fully engineered plan, design basis, and then the proposed commercial terms. I think that served us well early early on, and it continues to serve us well now, as we transition from primarily business development to established operations. MIDSTREAM Is the capital there? Who wants to invest in the midstream now? FORBAU Certainly there is capital available. Investors continue to be discerning on how to invest and where to invest, but my impression is that there appears to be no shortage of capital available for good projects, both on the upstream and the midstream sides. In my experience of interacting with private investors over the last eight years of my career, I see two things that seem a bit unique today. First is the increased level of interest from the larger infrastructure firms further upstream in the infrastructure space. In the past, I have viewed them as strategic investors in larger projects, further down the value chain: projects like long-haul pipelines, fractionators, large terminaling projects. Now they seem to be actively pursuing midstream investment opportunities as far upstream as in-field gathering and processing. Secondly, we continue to see an increasing level of interest in investment from sovereign wealth and strategic foreign investors. MIDSTREAM Where is your target area? Where would you like to be operating? FORBAU Caprock, partially by design and partially by necessity, has flown under the radar, so it doesn t surprise me that many folks aren t aware we are an established operator in the Delaware Basin. We feel very blessed and are extremely grateful that we have secured the opportunities we have in the Delaware Basin. Shortly after landing our first greenfield project in Reeves County, [Texas], we began to realize the dramatic growth that was headed our way and it s been heads down, go-go-go and execute! So at least for the next year or so I envision Caprock doing just that in the Delaware Basin. The vast majority of our assets are set in northern Reeves County, and we ll continue to look at executing for our customers there, to be certain that we re exceeding expectations, providing cost effective, reliable services in the area. We will continue to grow organically around those assets. 2017 is going to be a high-growth year for us. Going into 2018 we may be able to step back, take a breath, and start to look outward again for other opportunities, but I think the opportunity we have in the Delaware Basin is going to be as much as we can say grace over in the near term. MIDSTREAM Would you rather build or buy? FORBAU I have done both over my career. We ve actually done both here at Caprock. I think both have in the right circumstances been equally attractive ways to enter and grow the business. Generally speaking, though, building grass roots infrastructure is better for a business model like ours. When you re in a very desirable basin with a competitive market like the Delaware Basin, it can be difficult for the small, startup, private equitybacked companies to look at buying assets in a way that makes sense. MIDSTREAM What M&A trends do you see happening in 2017? FORBAU The first couple of regional midstream sales we have seen in 2017 Outrigger, Alpha Crude Connector appear to have been strong processes with very successful outcomes. We hear that others are either out to market right now or will be shortly. My guess is that it s going to be a strong M&A year in the Delaware Basin. It has been strong on the upstream side and it ll continue to be strong. I think it will be strong on the midstream side as well. MIDSTREAM You touched earlier on your management team, what strengths do they bring to the table? FORBAU Yes, what I can say about the Caprock team is that I feel incredibly lucky to have them. Look at what they have accomplished: By July of 2017, we will have been building assets for about a year, and if you look at the volume of work they have executed on within a year it s pretty staggering to

The Interview Caprock Midstream is putting the finishing touches on its expanded natural gas gathering system serving Delaware Basin producers. me. That s solely due to them, and I have to give them all the credit. They are a hardworking team. That s at the core of what Caprock believes: It s about teamwork, it s about making sure we re developing the services and infrastructure our customers need. We try to work in a very collaborative, solutions-oriented way with our customers. The entire team is very consistent in that approach. When creating Caprock, I talked with several individuals until the team of partners came together. It is a group of like-minded energy professionals. Each of them are top-tier in their respective fields, and they are a bunch of hard chargers. They are well-learned, self-motivated, ethical and well thought of throughout the industry. I can t say enough about the team. They are a great group of guys and ladies. MIDSTREAM In your opinion, what are the big midstream trends to watch? FORBAU I have to believe that the tremendous production growth we re seeing in the Delaware Basin will continue to drive growth in downstream infrastructure. I m sure we ll see a real push out of the Delaware for additional takeaway for natural gas, crude oil and perhaps natural gas liquids. I would guess that we will see many of these types of projects over the next five years. MIDSTREAM So where do you think the oil and gas business, overall, will be in five years? FORBAU Well, let me get my crystal ball out, that s a tough one! You know, the nature of our industry is that it s cyclical. We see good times and we see rough times. But I believe that even with the ups and downs, when we come out of each downturn, we are stronger than when we went into it. I m very optimistic about the oil and gas business over the next five years and beyond. I think that, with the industry s drive toward continual learning, getting smarter in what we are doing, we will see continued improvement. I think the industry has a bright future! n Paul Hart can be reached at pdhart@hartenergy.com or 713-260-6427. Caprock Midstream LLC Funded: 2015 Headquarters: Humble, Texas Leadership: Mike Forbau, CEO Sanjay Bishnoi, CFO David Ferer, COO Darin Aucoin, Vice President of Commercial Activities John Phillips, Vice President of Engineering Joe Velasquez, Vice President of Operations Equity provider: Energy Spectrum Partners VII LP Key assets: Delaware Basin, Reeves and Ward counties, Texas Current system throughput Natural gas: 50 million cubic feet per day (MMcf/d) Water: 40,000 barrels per day (bbl/d) Crude oil (flow unconnected); 10,000 bbl/d System as of July 2017: 227 miles of pipelines 150 MMcf/d of gas processing capacity 63,000 horsepower of compression 680 MMcf/d of gas gathering capacity 500 MMcf/d of residue gas takeaway capacity 350,000 bbl/d of water gathering capacity 135,000 bbl/d of water disposal capacity 240,000 bbl/d of oil gathering capacity 20,000 bbl/d of oil storage 22,000 bbl/d of NGL takeaway capacity Source: Caprock Midstream LLC HART ENERGY 1616 S. VOSS, STE. 1000, HOUSTON, TX 77057 USA +1 713 260 6400 FAX +1 713 840 8585