Capillary Tube for Deliquification Growing Rapidly in USA. Over 600 MMSCF/Day increased production in USA

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1 Capillary Tube for Deliquification Growing Rapidly in USA Over 6,000 Wells Completed to date Over 600 MMSCF/Day increased production in USA Successful applications in high PI wells in Europe Big break through was metallurgy & manufacturing Down hole hydrostatic valve critical to soap optimization

2 Wells Completed for 5 Years for Liquid Loading With Capillary Injection Tubes Enhancing Gas Production One of the better ROI in the Upstream Gas Industry day payout Sound Engineering & candidate selection achieved 95% success ratio Average rate increases over 50%, many are over 100% Increased Reserves and enhanced production from an existing assets We have strings in wells now for over 5 years

3 South Texas Well 300,000 SCF/day to 1.2 Million SCF/day McAllen # Cap string installed here 1500 FTP MCFD /18/03 08/07/03 09/26/03 11/15/03 01/04/04 Date

4 What are Capillary Injection Strings? High Strength Duplex-Alloy Continuous tube, i.e. ¼,3/8,5/8 Tube is injected through production tubing & wellhead Tube is deployed into the well while it is flowing No work over rig required, no bull heading into formation Tube is permanently left hanging in the wellhead Chemicals or water are injected down hole continually

5 A truck can complete 2-3 wells/day Rig up is simple and quick

6 2 Man rig-up keeps cost of service reasonable& reduces deferred production as the well continues to flow

7 DOWN HOLE CHEMICAL INJECTION VALVE

8 There is a considerable amount of Technology Metallurgy selection and tube manufacturing Injector head design and operations Down hole chemical injection valves for 1000s of cycles Software for well candidate selection Chemical understanding to avoid plugging & tube pitting

9 Successful Capillary Tube Installation Requires an Engineered System Engineered a system that ENHANCES gas production Tested & solved injection equipment & down hole tools issues Research on foam physics and flow dynamics Developed new alloy small diameter manufacturing methods Developed proprietary software for well selection using foam

10 Dyna-Soft PRODUCTION TUBING DATA WATER TUBING INSIDE DIAMETER INCHES AVG WATER PRODUCTION/24 HOUR BBLS/DAY 1 TUBING OUTSIDE DIAMETER INCHES 1.75 DENSITY OF PRODUCED WATER LBS/GAL 9.7 DEPTH TO END OF TUBING FEET SURFACE TENSION OF PRODUCED WATER DYNES/CM 72 CASING DATA CHLORIDES PPM CASING INSIDE DIAMETER INCHES PH 7 PERFORATION DATA CONDENSATE TOP PERFORATION FEET AVG CONDENSATE / DAY BBLS/DAY 0 BOTTOM PERFORATION FEET GRAVITY OF CONDENSATE DEG API 56 PRODUCTION VIA SUFACE TENSION CONDENSATE DYNES/CM 20 PACKER Y/N N OIL PRODUCING UP TUBING/ANNULUS T=1,A=2 1 AVG OIL PRODUCTION/24 HOUR BBLS/DAY 0 MEASURED 30 DAY AVG. GRAVITY OF OIL DEG API 20 SURFACE FLOWING PRESSURE PSI 144 SURFACE TENSION OF OIL DYNES/CM 20 SURFACE FLOWING TEMPURATURE DEG. F 80 GAS BOTTOM HOLE TEMPERATURE DEG. F 265 AVG. GAS/24 HOURS MCFD 100 CAPILLARY TUBING GRAVITY OF PRODUCED GAS 0.65 TUBING O.D. INCHES 0.25 H2S % 0 ALLOY 2507 CO2 % 2 SET POINT/LENGTH FEET SHUT-IN CONDITIONS ADDITIONAL TOOL WEIGHT? LBS 0 SHUT-IN SURFACE PRESSURE PSI 2000 OUTPUT: PRESENT SURFACE CONDITIONS OUTPUT: MINIMUM LIQUID VELOCITY/FLOW RATE PRESENT VELOCITY: if tubing FT/SEC MINIMUM CRITICAL VELOCITY: LIQUID FT/SEC PRESENT GAS FLOW RATE MCFD MINIMUM CRITICAL GAS FLOW RATE: LIQUID MCFD PRESENT VELOCITY: if annulus FT/SEC OUTPUT: PRESENT BOTTOM HOLE CONDITIONS OUTPUT: MINIMUM FOAM VELOCITY/FLOW RATE PRESENT BH VELOCITY IN TUBING FT/SEC MINIMUM CRITICAL VELOCITY: FOAMED FT/SEC PRESENT BH VELOCITY IN CASING FT/SEC MINIMUM CRITICAL GAS FLOW RATE: FOAMED MCFD BOTTOM HOLE FLOWING PRESSURE PSI OUTPUT: GAS FRACTION METHOD MINIMUM CRITICAL VELOCITY: FOAMED FT/SEC MINIMUM CRITICAL GAS FLOW RATE: FOAMED MCFD FLOW VELOCITY MIN. VELOCITY (LIQUID) COMMENTS PRESENT % Hydrocarbon appears to be acceptable. VELOCITY MIN. VELOCITY (FOAMED) This well appears to be liquid loading.

11 This Bryan Texas well went from MSCF/DAY ¼ tube installation completed with an internal suspension hanger in place.

12 Operators can t increase gas with the bit as fast as Capillary Tubing Does In East Texas it takes 40 days to drill 3 MMSCF/Day well Same operator ran 30 capillary tubes in same period Capillary increased production 22 MMSCF/day Dry hole cost $1.5 million, capillary cost $450, Operator has now run several hundred completions

13 This European well went from 0-7 Million SCF/day

14 Rocky Mountain Ft. Union Formation 600,000 SCF/Day to 1.2 Million SCF/Day

15 12,000 foot Travis Peak Texas Tight Gas Sand 90,000 SCF/Day to 300,000 SCF/Day Cap String Installed Oct. 9

16 Cotton Valley Sand goes from 134 to 304 MSCF/Day Hudson A # Water = 81 BW/MMCF (lifetime) Condensate = 5 BC/MMCF (lifetime) MCF/Month 1000 Installed capillary string 6 month average prior to capillary string = 134 MCFD 6 month average following capillary string = 304 MCFD Months

17 Plunger Lift vs. Capillary String East Texas Typical Prod. with Plunger-Lift, Total Prod. 225 mcfg & 6 bw Gas Rate, mcfd flow rates decline as w ell loads-up w ell shuts-in and plunger falls flow rates increase as w ell opens & plunger rises to surface w ell shut-in for press build-up w ell opens for flow and plunger travels to surface flow rates decline as w ell loads-up again Wtr. Rate, bwd :00 2:00 4:00 6:00 8:00 10:00 12:00 2:00 4:00 6:00 8:00 10:00 12:00 Time As prod rates decrease, velocity decreases which causes fluid loading. Don t run plungers in salting, scaling, and or sanding wells

18 Same Well after Capillary Installation Total Prod. 475 mcfg & 15 bw Gas Rate, mcfd :00 2:00 4:00 6:00 8:00 10:00 12:00 2:00 4:00 6:00 8:00 10:00 12:00 Time more consistent flow rates are maintained w ith no shut-in time Wtr. Rate, bwd After the installation of a capillary string, foamers can be applied downhole which significantly lightens the hydrostatic column, fluid is consistently unloaded, and prod rates are improved. Total prod for the period is more than doubled, 250 mcfd. No downtime is required which better facilitates the prod equipment and addition of compressors.

19 This well went from 225 to 475 MMSCF/Day Before & After Cap. Installation Avg. Prior: 225 mcfd & 6 bw pd Gas Rate, mcfd Avg. After: 475 mcfd & 15 b d Wtr. Rate, bwpd Installed Cap String Days Payout: (250 mcfgd increase X $2.50/mcfg)(.875 net)(.80 Op. cost) - (9 bw pd X $.70/bw for SWD) - ($30.00/d chemical cost) = $401.90/day Capital Inv. of $15,000 for avg. 10,000' inst. / $401.90/day = 37.32

20 LOCATIONS IN NORTH AMERICA Lacombe Bakersfield Farmington Kilgore Midland Corpus Christi Lafayette

21 There is a considerable amount of Technology Metallurgy selection and tube manufacturing Injector head design and operations Down hole chemical injection valves for 1000s of cycles Software for well selection Chemical understanding to avoid chemical plugging

22 An orbital welder and annealing device

23 Typical Field Camp Shop for Testing & Welding

24 Additional Chemical Applications & Benefits Eliminates salt blocks & need for broaching Continual chemical injection protect tubulars/pipeline No downtime for treating we deploy in live wells Permanent injection of chemicals down hole at perfs Inhibits paraffin, wax & gas hydrate build ups Sweeten sour fluids, decrease scale build up

25 We don t want solid foam stream to surface We want Mist Flow (wet foam)

26 The industry has spent considerable effort understanding the physics of well foaming Bubble Flow Slug Flow Churn Flow

27 Foaming Application & Benefits No cycle time, continual de-watering Delay need for compression & velocity strings Minimizes facility fluctuation due to liquid slugging Works in sanding, scaling, and waxing wells Improves chemical efficiency and placement

28 6800 Psi Flowing Pressure 66 Million SCF/day Corrosion Placement in Monobore well El Paos #1B.jpg

29 Why Use Capillary Strings? Enhance gas production and reserves Treat continually for corrosion Treat continually for scale problems Treat continually for hydrates in well & flow line Treat continually for paraffin's in well & flow line