MIDSTREAM OPERATIONS
Hillwood has built a 30-mile pipeline system that connects the wells at Alliance to a network of interstate pipelines to move gas to market. The Alliance Pipeline system also carries gas from third party producers. The pipeline operates at 400psi and moves 45mmcfpd with capacity for 100+mmcfpd.

SALT WATER DISPOSAL
A major component of Hillwood's leasing operating expenses (LOE) is disposal of the water that is produced from its 42 wells at Alliance - about 3,500 barrels of water each day. This water has a high salt content and must be trucked to third party salt water disposal wells, whose operators typically cahrge $0.60 / bbl for disposal.

To lower lease operating expenses, Hillwood has partnered with West Fork Tank Trucks (a water hauling company) to drill a salt water disposal well, at a cost of about $3.0MM, to handle Hillwood and third party produced water. Upon completion, all of the water generated from Alliance will be disposed of in this well. In addition, the well will have another 6,500 barrels of capacity/day. West Fork Tank Trucks will be responsible for filling this capacity.