The Horn River Basin Producers Group (HRBPG)

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Gervais Palmer
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1 The Horn River Basin Producers Group (HRBPG) An Unconventional Approach Applied to an Unconventional Reservoir CAPL Topical Issues Luncheon April 30, 2009 Robert Spitzer Chair HRBPG VP Exploration Apache Canada Ltd.

2 Agenda Shale Gas 101 The Horn River Basin The Producers Group Formation Mandate Members Structure Defining Success Accomplishments Summary

3 Why the focus on unconventional? it is what basins have left to offer on a large scale Unconventional resources driving supply growth Shales to dominate L-48 production growth Company MMcfd Q Q Percent Change 1. XTO 1,561 1, % 2. Chesapeake 1,851 1, % 3. EOG Resources % 4. Williams Companies % 5. EnCana 1,387 1, % 6. Devon Energy Corp. 1,783 1, % 7. El Paso % 8. Apache Corp % 9. Occidental % 10. Anadarko Petroleum 1,637 1, % Large growth companies have exposure to resource Plays Unconventional the way of the future in Canada Source: Williams/ Deutsche Bank Conference 2008

4 Shale Gas 101 Conventional Reservoir Unconventional Reservoir 10X Mag 100X Mag 20 um 10X Mag < Grain Size < Permeability < Porosity Stimulation Free + Adsorbed Gas

5 Gas Development Conventional Reservoir Shale Gas Reservoir Wells Plan View

North American Shale Basins Potential for shale gas plays became apparent from Barnett in Texas Horn River Basin Currently many shales being evaluated throughout US and

6 North American Shale Basins Potential for shale gas plays became apparent from Barnett in Texas Horn River Basin Currently many shales being evaluated throughout US and Canada Horn River Basin is one of these Thickness, richness and aerial extent of shale makes this a sizeable prize, 100 s of TCF s Distance from market is a significant disadvantage

7 Horn River Shale Gas Play Shale is up to 600 ft thick Depths range from 8,000 to 10,000 ft 320 ft Muskwa/Otter Park Shale Depth: 8500 ft tvd ft md Slave Point Horizontal wells and multiple frac technology required to extract gas 150 ft Klua/Evie Shale Keg River

3,000 sq mi NWT BC 94-O PRESQU LLE BARRIER REEFCOMPLEX Area of

8 Regional Distribution of Resource Shale is present over a large area Best part is in the Horn River Basin Prospective area is 3,000 sq mi NWT BC 94-O PRESQU LLE BARRIER REEFCOMPLEX Area of Interest 3000 sq mi CORDOVA EMBAYMENT 94-P KLUA EDGE ALTA ZAM A 20 mi

9 A New Approach Recognition very early that there was an opportunity to do business differently in this area in part because Relatively unexplored Land was at least 50% held It makes sense to work together right from the start on a project with this potential magnitude! Approach to companies well received

10 The Shale Gas Producers Group The group was formed November 2007 and has involvement of the BC Government (MEMPR, OGC), the First Nations and major industry players: Apache Nexen ConocoPhillips Encana EOG Pengrowth Devon Quicksilver PetroCanada Exxon Mobil/ Imperial Stone Mountain The purpose of the group is to facilitate cooperation and communication between companies, First Nations, government and other key stakeholders This group is evolving and still has some major work to do

11 HRBPG Structure Chair 11 Steering Committee Members (1 from each member company) Operations Subcommittee Regulatory Subcommittee Environmental Subcommittee Communications Subcommittee

12 Values of Group The group will conduct our business with: Honesty Integrity Respect for others Open communication Responsible development

13 What Does Success Look Like? success of this project means that the main concerns for each major group ie. the community of Fort Nelson, the government (people of British Columbia), the First Nations and industry are understood and addressed while responsibly developing the asset

14 The Road to a Successful Outcome Voice in Ongoing Development People Factors SUCCESS FOR ALL TIME Establish Process/ Values and Develop Solutions to Concerns Identify Stakeholder Concerns Identify Stakeholders Communication Communication RESPONSIBLE DEVELOPMENT INTEGRATION OF PEOPLE / ECONOMIC FACTORS Technical / Economic Factors Idea Evaluation Phase Development Phase TIME

15 Technical/ Economic Evolution Concept + $? 15 (14) Number 10 5 (4) (6) (11) Vertical well refracs Vertical drills fracs Hz wells 3 fracs Hz wells * > 3 fracs Pad drilling Economic viability very few wells in a large area * NB: 11 wells licensed but not drilled

Two Island Lake: 2009 Pad Activity 13 11 9 14 6

16 Two Island Lake: 2009 Pad Activity APA Operated 15 EnCana Operated ECA Op. wells drilled APA Op. Muskwa wells APA Op. Klua wells ECA Op. Muskwa wells Road Access APA/ECA Lands

17 Addressing Stakeholder and First Nations Concerns Local Employment/Developing Capacity Principles Actions Environment Area operating protocals (AOP s) Water sourcing options partnering with government for innovative solutions Low impact seismic: Slim Bin Development Planning Communications

18 HRBPG Employment and Capacity Building Guiding Principles We are willing to employ local businesses and individuals as all our member companies do in their respective operating areas. Specifically this means: a) necessary safety requirements are met, b) necessary qualifications in the required skill set exist, c) costs are competitive for similar work. d) required personnel with the necessary skill set are available at the required time. e) companies will be courteous and provide reason(s) for applicants not achieving employment for a specific job in that circumstance. We are willing to contribute to building capacity for local businesses and individuals in partnership with local and provincial governments, First Nations, (Fort Nelson and Fort Liard) and the community of Ft. Nelson. We commit to communicating progress of the HRB shale gas project in a mutually agreeable manner.

19 Employment/Capacity Building: Actions Employment to date Developing a report card showing local/non local hiring. Initiated by HRBPG led by BC government including Town of Fort Nelson Procurement office in Fort Nelson funded in large part by HRBPG Energy Expo in Fort Nelson with all producers and 35 service providers! Capacity Building HRBPG funding 100% of Operator training program run by Northern Lights College in Fort Nelson.

20 Environment Developed Area Operating Protocols, a suite of best management practices designed to minimize environmental impacts. AOPs have been sent to OGC and First Nations for review Assembled, with government, an inventory of the environmental data collected to date. This will be used to identify gaps for future study efforts. Working in collaboration with Geoscience B.C. to identify sustainable sources of water in the Horn River Basin. Priority has been given to the identification, mapping and testing of nonpotable subsurface sources. To date over $9.5 MM has been committed by both Geoscience B.C. and the HRPG

21 Slim Bin Seismic

22 Development Plan Given the operations work completed since September 4, 2008, industry is now in a position to begin development planning scenarios to government, stakeholders and First Nations Three scenarios are being developed to reflect the life of the project (which spans decades) at different gas prices Scenarios will include many assumptions and will therefore be constantly adjusted; however, they will provide an idea of what full-scale development may look like Anticipated completion: initial draft for August 1 final draft October 31

23 Communications Symposium: September 2008 Energy May 2009 Chalo School November 2008 Chamber of Commerce February 2009 Meeting with Fort Nelson First Chalo School including OGC, MEMPR and HRBPG Monthly HRBPG meetings with participation of First Nations Town of Fort Nelson, OGC and MEMPR HRBPG Communications subcommittee publications FAQ Newsletter Success Stories

24 Summary Unique approach adopted early to better manage a large unconventional opportunity Significant cultural diversity amongst 11 producers has been a positive influence egos parked outside the door Praise is in order not only for individual producers for positive developments, however equally our stakeholders (OGC, MEMPR, Town of Fort Nelson) and First Nations for their significant efforts! Much has been accomplished much more to be done....

DTE Energy Barnett Shale Overview. April 6, 2006

DTE Energy Barnett Shale Overview April 6, 2006 Safe Harbor Statement The information contained herein is as of the date of this presentation. DTE Energy expressly disclaims any current intention to update