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1 NEW INDEPENDENT TEST RESULTS FOR POTENTIAL US LICENSEE FURTHER VALIDATE LWP S FLY-ASH PROPPANTS Independent tests commissioned by a potential US licensee/jv Partner validate LWP s low-cost fly-ash ceramic proppants capability to compete with frac sand Conductivity and permeability performance tests compared white and brown sands against LWP low-cost fly-ash ceramic proppants Test results confirm LWP s low-cost fly-ash ceramic proppants significantly outperform frac sands Negotiations with potential US partner and other potential parties are ongoing Solid progress being made in India with Pune plant upgrade ASX ANNOUNCEMENT 2 November 2016 Energy technology company LWP Technologies Limited (ASX:LWP) ( LWP the Company ) is pleased to provide the attached independent expert testing report of LWP s low-cost fly-ash based ceramic proppants, which are used in the hydraulic fracturing of unconventional oil & gas wells. The report clearly demonstrates the superior performance of LWP low-cost fly-ash based ceramic proppants over mined frac sands. Previous conductivity test results compared the performance of LWP high-strength ceramic proppants with high strength ceramic proppants made from bauxite and/or kaolin clay. However, depressed oil and gas prices have seen almost all oil and gas producers opting for low-cost mined frac sand proppants due to the high costs of high-strength ceramic proppants, often together with expensive transport and logistics costs. To LWP s great advantage, LWP has been able to redesign its ceramic proppants to minimise manufacturing costs, so that LWP low-cost ceramic proppants can potentially compete with mined frac sand on price. The test report shows that compressive strength of LWP low-cost ceramic proppants is significantly higher than comparable mined frac sand. LWP Technologies Limited, Suite 29 Level Eagle Street Brisbane Qld 4000 ABN T +61 (0) F +61 (0) E admin@lwptech.com W
2 Enhanced conductivity and permeability directly contribute to maximizing the productivity of unconventional oil and gas wells. A website link to an article from the SPE provides an overview of conductivity in layman s terms. The development of LWP s low-cost fly-ash ceramic proppant has allowed discussions with potential licensees that had been discontinued due to the decline in oil and gas prices, to recommence. LWP commenced early stage discussions 6 weeks ago with a US-based company that expressed interest in a potential license or Joint Venture partner in North America, to commercialise and manufacture LWP s low-cost flyash ceramic proppants. The potential licensee/jv partner, who must remain confidential at this time due to nondisclosure arrangements, commissioned this latest conductivity/permeability test as part of their early stage investigation in LWP ceramic proppants. PropTester Inc, a highly-regarded independent expert laboratory located in Houston Texas that specialises in the research and testing of products used in the hydraulic fracturing and cement operations, completed the test work. The PropTester tests were designed to replicate accelerated downhole operations of a typical hydraulic fracturing operation, and tested the comparative performance of mined white frac sand, mined brown frac sand and LWP low-cost fly-ash ceramic proppant samples for conductivity and permeability. The complete test results that accompany this ASX filing which show that LWP proppants display superior conductivity and permeability compared to the mined frac sand proppants tested using identical testing regimen. (see tables on page 14) LWP s Dr. David Henson commented: These latest results continue to validate the superior performance of our low-cost fly-ash based ceramic proppants. The review of these results marks the next step in negotiations with a potential US-based licensee/jv partner that is closely assessing our technology. With oil & gas markets stabilising, we are witnessing growing levels of inquiry from a number of parties about our technology, and these latest results support our discussions and negotiations with all parties. LWP s Chairman Siegfried Konig added, LWP s complete focus is on advancing with the commercialisation and manufacture of our fly-ash ceramic proppants, and we are pleased to see increasing activity across a number of markets. The results of the tests in the United States are most encouraging. Also, progress in India with our JV partner Hallmark on the plant upgrade in Pune is ongoing, with clean-up and upgrade operations at the plant progressing. We look forward to updating shareholders on our progress across the business in the months to come. For further information please contact: ENDS LWP Technologies Limited, Suite 29 Level Eagle Street Brisbane Qld 4000 ABN T +61 (0) F +61 (0) E admin@lwptech.com W
3 Siegfried Konig Chairman LWP Technologies Limited Phone: For Media & Investors please contact: Ben Jarvis, Six Degrees Investor Relations +61 (0) About LWP Technologies LWP Technologies Limited (LWP) is an Australian oil and gas technology company focused on commercialising next generation, fly-ash based, proppants for use in hydraulic fracturing of oil and gas wells globally. LWP is seeking to commercialise its proppants as a cost effective, superior alternative to bauxite and clay based ceramic proppants, typically used in hydraulic fracturing operations currently. The Company commenced proppant production from its pilot scale proppant manufacturing plant in Queensland, Australia, in Q3, LWP is seeking joint venture partners and/or licensees to commercialise its proppant product, and deliver significant returns to shareholders. About Proppants Proppants are a sand-like commodity used to prop open fractures in shale rocks which allows oil and gas to flow. Proppants are often the single largest cost item in the fracking process and represent a multi-billion dollar global market annually. Traditional ceramic proppants are made from clay and/or bauxite. LWP Technologies ceramic proppants are majority manufactured from fly-ash, a by product of coal fired power plants. The Company is of the view that its unique proppant product has the potential to lead the industry due to: the widespread abundant availability of fly-ash, often near to oil and gas shale resources; the ultra-light weight of LWP fly-ash proppants; and the ability of LWP proppants to withstand the very high pressures and heat of deep wells. LWP proppants have been certified by Independent Experts to meet or exceed both the American Petroleum Institute standards and the ISO standards. LWP Technologies Limited, Suite 29 Level Eagle Street Brisbane Qld 4000 ABN T +61 (0) F +61 (0) E admin@lwptech.com W
4 QUALIFYING FLUID & PROPPANT PERFORMANCE Long Term Conductivity Analysis Sample A - White Sand Sample B - Brown Sand Sample C - Ceramic Friday, October 21, HUFFMEISTER RD. STE. B CYPRESS, TX PH: FAX:
5 CONTENTS A. BACKGROUND 3 B. SAMPLE 3 C. EXPERIMENTAL PROCEDURES 3 D. RESULTS D.1 Baseline Fracture Conductivity, Permeability and Width Table 1 - Tabular data for Sample A - White Sand sample 5 Table 2 - Sieve analysis of Sample A - White Sand sample 5 Figure 1 - Graphic results of conductivity for Sample A - White Sand sample 6 Figure 2 - Graphic results of permeability for Sample A - White Sand sample 6 Table 3 - Tabular data for Sample B - Brown Sand sample 7 Table 4 - Sieve analysis of Sample B - Brown Sand sample 7 Figure 3 - Graphic results of conductivity for Sample B - Brown Sand sample 8 Figure 4 - Graphic results of permeability for Sample B - Brown Sand sample 8 Table 5 - Tabular data for Sample C - Ceramic sample 9 Table 6 - Sieve analysis of Sample C - Ceramic sample 9 Figure 5 - Graphic results of conductivity for Sample C - Ceramic sample 10 Figure 6 - Graphic results of permeability for Sample C - Ceramic sample 10 D.2 Photographs Figure 7 - Sample A - White Sand sample between steel cores 11 Figure 8 - Top view of Sample A - White Sand sample proppant pack 11 Figure 9 - Sample B - Brown Sand sample between steel cores 12 Figure 10 - Top view of Sample B - Brown Sand sample proppant pack 12 Figure 11 - Sample C - Ceramic sample between steel cores 13 Figure 12 - Top view of Sample C - Ceramic sample proppant pack D.3 Comparison Graphs Page 2 of 15
6 Background: Samples from LWP Technologies were delivered to the PropTester, Inc. laboratory in Cypress, TX. The samples were labeled Sample A - White Sand, Sample B - Brown Sand, and Sample C - Ceramic. Instructions were to test each sample for conductivity and permeability. Long-term fracture conductivity and permeability testing was performed on the samples at 2000-psi, 4000-psi, 6000-psi, 8000-psi, and 00-psi closure stress levels with the sampes being cycled down to of the closure stress for 1 hour at the end of each psi stress cycle. The test was performed at a temperature of 150 F using a 2% KCl. The cells are loaded at 2lb/ft2 between steel cores. International Organization for Standardization, ISO part 5 "Procedures for measuring the long term conductivity of proppants" was used to obtain baseline values. Standard baseline testing is 50 hours at each stress level starting at 2000 psi. Sample: Sample A - White Sand Sample B - Brown Sand Sample C - Ceramic Procedures: A 0 psi closure stress is applied across a test unit for hours at temperature to allow the proppant sample bed to reach a semi-steady state condition. The stress is then increased to the target stress and maintained for 50 hours. At the end of the 50 hours the sample is cylced down to of the target stress, allowed to stabilize for 1 hour and then the pack width, differential pressure, temperature, and flow rates are measured again. The stress is then increased back to the origonal target stress and final readings taken. As the fluid is forced through the proppant bed, the pack width, differential pressure, temperature, and flow rates are measured at each stress. Proppant pack permeability and conductivity are then calculated using Darcy equation. Multiple flow rates are used to verify the performance of the transducers, and to determine Darcy flow regime at each stress; an average of the data at these flow rates is reported. The test fluid is 2% KCl filtered to 3µm absolute. The initial conductivity, permeability and width is measured and compared to the final conductivity, permeability, and width after each stress period. Stress is applied and maintained using an Isco 260D. Stress is applied at psi/minute. Zero width of the proppant pack is determined by assembling the conductivity cell with shims and without the sample proppants. The distance between the width bars that are attached to each end of the conductivity cells are measured at each of the four corners and recorded. The cells are then disassembled and reassembled with the proppant samples. The measurements are made again at the beginning and ending of each stress period. Width is determined by subtracting the average of the zero from the average of each of the width values measured at each stress loading. Sieve analysis is performed using the procedure found in ISO :2006/ API RP-19C "Measurements of proppants used in hydraulic fracturing and gravel pack operations ". Standard US mesh screens are used to separate the samples by size. Based on the recommended sieve stack for a given proppant size, not more than 0.1% should be greater than the first specified sieve and not more than 1% should be retained in the pan. There should be at least 90% retained between the specified screens for an ISO graded proppant. Page 3 of 15
7 Calculations Conductivity: kw f =26.78μQ/(ΔP) *** Permeability: k=321.4μq/[(δp)w f ] *** k is the proppant pack permeability, expressed in Darcy kw f is the proppant pack conductivity, expressed in millidarcy-feet μ is the viscosity of the test liquid at test temperature, expressed in centipoises Q is the flow rate, expressed in cubic centimeters per minute ΔP is the differential pressure, expressed in psi is proppant pack width, expressed in inches W f *** ISO :2006(E) "Procedures for measuring the long term conductivity of proppants" 1. Lower pressure port A. Upper/lower pistons 2. Thermocouple B. Tetraseal 3. High pressure port C. Metal shim 4. Not used D. Cell body 5. Inlet E. Ohio sandstone 6. Outlet F. Proppant G. Center piston H. Width slots I. Set screws Page 4 of 15
8 Percent Retained For personal use only Particle Size Distribution Table 1 - Tabular data for Sample A - White Sand sample stress 1,000 24hrs 24hrs 50hrs 74hrs 1,400 1hr 75hrs 1hr 76hrs 50hrs 126hrs 2,800 1hr 127hrs 1hr 128hrs 50hrs 178hrs 4,200 1hr 179hrs 1hr 180hrs 50hrs 230hrs 5,600 1hr 231hrs 1hr 232hrs 50hrs 282hrs 7,000 1hr 283hrs 1hr 284hrs Quick Chek Time (Total) Conductivity (md-ft) lb/ft 2, 150 F, Steel core wafers, 2% KCl. Table 2 - Sieve analysis of Sample A - White Sand sample ISO (mm) Mesh size % Permeability (Darcy) Sample A - White Sand Pre-Sieve Width (in) Sample A - White Sand Post-Sieve <75 PAN 1.0% Total In-size (%) (-30+50) sieves 90% Median Particle Diameter (MPD, mm) / (MPD, inches) Mean Particle Diameter (mm) / (inches) MPD: %(-50 mesh) ISO designated sieves (-30+50) sieves Particle Size Analysis Sample A - White Sand Pre Sieve Sample A - White Sand Post Sieve PAN US Mesh Page 5 of 15
9 Darcys md-ft Figure 1 - Graphic results of conductivity for Sample A - White Sand sample 00 2lb/ft 2, 150 F, Steel Cores, 2% KCl Zero Pack Width: Bulk Density: in g/cm Conductivity (md-ft) Conductivity (md-ft) Figure 2 - Graphic results of permeability for Sample A - White Sand sample 0 2lb/ft 2, 150 F, Steel Cores, 2% KCl Zero Pack Width: Permeability (Darcys) Width, (in.) Permeability (Darcys) Width, (in.) in. Absolute Density: Page 6 of 15
10 Percent Retained For personal use only Particle Size Distribution Table 3 - Tabular data for Sample B - Brown Sand sample stress Time (Total) 1,000 24hrs 24hrs 50hrs 74hrs 1,400 1hr 75hrs 1hr 76hrs 50hrs 126hrs 2,800 1hr 127hrs 1hr 128hrs 50hrs 178hrs 4,200 1hr 179hrs 1hr 180hrs 50hrs 230hrs 5,600 1hr 231hrs 1hr 232hrs 50hrs 282hrs 7,000 1hr 283hrs 1hr 284hrs lb/ft 2, 150 F, Steel core wafers, 2% KCl. Table 4 - Sieve analysis of Sample B - Brown Sand sample Sample B - Brown Sample B - Brown ISO Sand Pre-Sieve Sand Post-Sieve (mm) Mesh size % < PAN Total 1.0% In-size (%) (-30+50) sieves 90% Median Particle Diameter (MPD, mm) / (MPD, inches) Mean Particle Diameter (mm) / (inches) MPD: %(-50 mesh) ISO designated sieves (-30+50) sieves Quick Chek Conductivity (md-ft) Permeability (Darcy) Width (in) Sample B - Brown Sand Pre Sieve Sample B - Brown Sand Post Sieve Particle Size Analysis PAN US Mesh Page 7 of 15
11 Darcys md-ft Figure 3 - Graphic results of conductivity for Sample B - Brown Sand sample 00 2lb/ft 2, 150 F, Steel Cores, 2% KCl Zero Pack Width: Conductivity (md-ft) Conductivity (md-ft) in. Bulk Density: 1.49 g/cm Figure 4 - Graphic results of permeability for Sample B - Brown Sand sample lb/ft 2, 150 F, Steel Cores, 2% KCl Permeability (Darcys) Width, (in.) 1 Zero Pack Width: in. Absolute Density: Width, 104 (in.) Permeability (Darcys) Page 8 of 15
12 Percent Retained For personal use only Particle Size Distribution Table 5 - Tabular data for Sample C - Ceramic sample stress Time (Total) 1,000 24hrs 24hrs 50hrs 74hrs 1,400 1hr 75hrs 1hr 76hrs 50hrs 126hrs 2,800 1hr 127hrs 1hr 128hrs 50hrs 178hrs 4,200 1hr 179hrs 1hr 180hrs 50hrs 230hrs 5,600 1hr 231hrs 1hr 232hrs 50hrs 282hrs 7,000 1hr 283hrs 1hr 284hrs lb/ft 2, 150 F, Steel core wafers, 2% KCl. Sample C - Sample C - ISO Ceramic Pre-Seive Ceramic Post-Sieve (mm) Mesh size % < PAN 1.0% In-size (%) Total (-30+50) sieves 90% Median Particle Diameter (MPD, mm) / (MPD, inches) Mean Particle Diameter (mm) / (inches) MPD: %(-50 mesh) ISO designated sieves (-30+50) sieves Quick Chek Conductivity (md-ft) Table 6 - Sieve analysis of Sample C - Ceramic sample 4 2 Particle Size Analysis Permeability (Darcy) Width (in) PAN US Mesh Sample C - Ceramic Pre Sieve Sample C - Ceramic Post Sieve Page 9 of 15
13 Darcys md-ft Figure 5 - Graphic results of conductivity for Sample C - Ceramic sample 00 2lb/ft 2, 150 F, Steel Cores, 2% KCl Figure 6 - Graphic results of permeability for Sample C - Ceramic sample Zero Pack Width: in. Bulk Density: 1.31 g/cm Conductivity (md-ft) Conductivity (md-ft) lb/ft 2, 150 F, Steel Cores, 2% KCl Zero Pack Width: in. Absolute Density: Permeability (Darcys) Permeability (Darcys) Width, (in.) Width, (in.) Page 10 of 15
14 Photographs Figure 7 - Sample A - White Sand sample between steel cores Figure 8 - Top view of Sample A - White Sand sample proppant pack Page 11 of 15
15 Photographs - con't Figure 9 - Sample B - Brown Sand sample between steel cores Figure 10 - Top view of Sample B - Brown Sand sample proppant pack Page 12 of 15
16 Photographs - con't Figure 11 - Sample C - Ceramic sample between steel cores Figure 12 - Top view of Sample C - Ceramic sample proppant pack Page 13 of 15
17 Darcys md-ft Comparison Graphs 00 Conductivity 2lb/ft 2, 150 F, Steel Cores Sample A - White Sand Sample B - Brown Sand Sample C - Ceramic 0 Permeability 2lb/ft 2, 150 F, Steel Cores 10 1 Sample A - White Sand Sample B - Brown Sand Sample C - Ceramic Page 14 of 15
18 KBW DISCLAIMER PROPTESTER MAKES NO WARRANTY OR REPRESENTATION (EXPRESS OR IMPLIED) CONCERNING THE PRODUCT, ITS MERCHANTABILITY, ITS FITNESS FOR ANY PURPOSE OR USE, OR FOR ACCURACY OR COMPLETENESS OF ANY INFORMATION BY THE SELLER OR MANUFACTURER. IT IS THE RESPONSIBILITY OF THE USER OF THE PRODUCT TO INVESTIGATE AND UNDERSTAND ALL PERTINENT SOURCES OF INFORMATION AND TO COMPLY WITH ALL LAWS, REGULATIONS AND PROCEDURES APPLICABLE TO THE SAFE HANDLING, USE AND DISPOSAL OF THE PRODUCT AND TO DETERMINE THE SUITABILITY OF THE PRODUCT FOR ITS INTENDED USE. THIS REPORT IS LIMITED TO ONLY THOSE TESTS REQUESTED AND PERFORMED ON THE INDICATED SAMPLE. NO CLAIM OF DAMAGES OF ANY KIND, WHETHER AS TO PRODUCT DELIVERED, FOR NON-DELIVERY OF PRODUCT OR USE OF PRODUCT AND WHETHER BASED ON CONTRACT, BREACH OF WARRANTY, BREACH OF REPRESENTATIONS, NEGLIGENCE, STATUTES OR OTHERWISE SHALL BE GREATER THAN THE COST OF THE TEST, PROCEDURES, OR ANALYSIS COVERED BY THIS REPORT. IN NO EVENT SHALL PROPTESTER BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE CLAIM IS BASED ON CONTRACT, BREACH OF WARRANTY REPRESENTATION, NEGLIGENCE, STATUES OR OTHERWISE. PropTester, Inc B Huffmeister Rd Cypress, TX Customer Service: Fax: Page 15 of 15
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