RailCar Cycle Times-Peaker Energy

PEAKER ENERGY. February 2014.

RA ILCAR CYCLE T IMES SUNK COST OR COMPET I T I VE OPPORTUN ITY?

Confidential and Proprietary Information of Peaker Energy GroupConfidential and Proprietary Information of Peaker Energy Group

Content! Cycle Time Defined

" Stages of the “Cycle”

# Constant or Variables

$ Opportunity or Cost? …Opportunity Cost? Optimization Areas Optimization Examples

% Thoughts on your “Return Home Cycle”

Confidential and Proprietary Information of Peaker Energy Group

CYCLE TIME DEFINING THE LOGISTICS PROCESS

cycle time |!s"k#l t"m| noun • loading a car at shipper’s point of origin

• transit of this car from Origin to Destination

• unloading of the car at the destination site

• transported back empty to origin

• finally, held empty at shipper’s origin until re-loaded and then the cycle begins again.

exceptions to the process • backhaul: Loading another commodity at the destination to

return to the origin “full” vs. empty

• new origin: Car unloads at destination but is then sent to a different origin to load vs the original origin.

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CYCLE TIMESTAGES

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Loading

Empty at Origin

In Transit Back to Origin Unloading

In Transit to Destination


CYCLE TIMECONSTANT OR VARIABLES

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“Many think of railcar cycle times as constants or only functions of transit time. There are several variables in the process that can be optimized. These optimizations may not appear to be very significant, but exponentially multiply over volume and time.”


CYCLE TIME OPTIMIZATION AREAS

Facility Design

Flow and Ingress/Egress Car storage

Equipment Selection and Placement

Make sure you have the right equipment in the right place to optimize the process

Technology

Use technology to not only optimize the process but make it safer as well. Look for new technologies and equipment that can optimize the process

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Planning

Well designed process and operations plan Bad Order Cars Scheduled Maintenance / Car Cleaning

People

The most important thing is well trained operations and HSE staff.

Communication

Communicating with the servicing railroad and operating staff to best coordinate movements


OPTIMIZATION EXAMPLEFACILITY DESIGN

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LoadingAllows for easy access from servicing railroad to bring in cars without interrupting or delaying the loading process or their mainline service.

Make sure you have redundancy in your pumps to accommodate any planned or unplanned maintenance.


OPTIMIZATION EXAMPLE

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In Transit to Destination

COMMUNICATION

Most of the variables in this stage of the cycle are out of your control “unless you are the railroad”

Keeping on top of your scheduling “milestones” and communicating with the railroad will at least give you a heads up on any unforeseen delays like weather, or equip failure.



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Unloading

EQUIPMENT

One of the newer issues with respect to cycle times that has presented itself is the timely unloading of heavier, high-viscosity crude oils off of railcars.

There is the question of what type of heat, how much, how fast, how many cars concurrently, pump size, pump type, and the variables within this issue have thousands of different permutations.

The key is to find the right combination for the slate of crudes you will be unloading.

Look at ways to get the crude circulating in the cars. This will not only help unload quicker, but will also allow you to recover more of the crude from the car.



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In Transit Back to Origin

TECHNOLOGY

Use technology to keep track of your cars and make sure you don’t have a car dropped or lost along the way. Having “active” technology can mean the difference of having all of your cars back at the origin at the same time or maybe a couple coming in 2 days later. That gaff could cause a domino effect on your whole months schedule.



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Empty at Origin

PLANNING

Remember to schedule your maintenance accordingly and ahead of schedule. Make maximum use of any downtime on cars. If something needs repaired like an air-hose, make sure you look at the car’s maintenance schedule, and if there is anything that can be done within that window, get it done at the same time.


THOUGHTS ON “RETURN CYCLE”

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SAVINGS FROM EFFICIENCY

Q: What are the savings realized from the reduction of 1 day to the cycle time for a 1 Unit train* per day move?

DAYS

Load 2

Transit 6

Unload 2

Transit 6

22.8 CYCLES PER YEAR

DAYS

Load 1.5

Transit 6

Unload 1.5

Transit 6

24.3 CYCLES PER YEAR

Results

+105,300 additional bbls for year +$10.5 MM additional revenue 7500.00 of savings in car lease cost

*Unit train consists of 104 GP 30 Railcars, Cars loaded to 675 bbls, crude price $100/bbl, $2000/mo car lease

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RailCar Cycle Times-Peaker Energy