Marcellus Shale Water Group Targeting unconventional oil & gas reservoirs with better ideas, better solutions Our technique of calculating actual production increases the value of your reservoir 1
Predictive Production provides the answers Where should you drill? Where should you frack? How do you increase yield? How can you save money? How can you increase the value of the reservoir? The Problem 2
Having a tough time hitting your fracking target these days? Maybe you are just using the wrong arrow 3
The Problem Fact No. 1 95% of the oil from shale plays is left in the ground. Result: Unavailable resource = $$$$$ Fact No. 2 Two-thirds of the hydraulic fracturing stages do not produce oil. Result: Misdirected effort = $$$$$ Fact No. 3 Traditional interpretation of well log data is not applicable for formation evaluation in shale plays. Result: Incorrect analysis = $$$$$ 7 The Problem Questions If you can recover only 5% of the oil or gas from the formation, how does that affect the value of your reservoir or field? What if you could increase that to 10%? 8 4
The Problem Questions If only 33% of your fracked stages actually produce meaningful amounts of oil or gas, how does that affect the value of your reservoir or field? What if you could increase that to 50 90%? 9 The Magnitude of the Overall Problem Every year more than 200,000 wells are drilled in shale-oil deposits worldwide. Our technology can also be applied to existing wells to make them more productive. 5
The Solution Instead of using metrics that apply to conventional oil and gas formations, we use proven metrics that specifically apply to unconventional oil and gas shale formations. As a result, we are able to assess reservoirs more accurately and provide more meaningful information to the client. For example, while others only identify pay flag zones we identify pay flag zones plus production zones with estimated barrels of oil per day per 100 feet (vertical). 6
What we can do for you Reduce drilling and fracking costs Increase reservoir production Increase the size and value of reservoirs The Technology Proprietary algorithms to calculate permeability and well production (bbl per zone) from open hole log data Based on the analysis of hundreds of hydrodynamic or pressure build-up well tests Successfully applied to deposits in the United States, Russia, Kazakhstan, Mexico, Peru, and Canada: sandstone, carbonates, offshore carbonates, tight rock, and various oil and gas shale formations Validated by test results in the Pennsylvania Marcellus Shale and more than 100 wells in the Texas Permian Basin 7
Project Example In vertical wells, our technology has demonstrated achieving higher production with five fracking stages than conventional practices achieve with ten stages. Our technology targets precise vertical intervals in wells with the highest recoverable oil; increased well production by at least 20% and decreased cost of fracturing up to 50%. Our technology optimized locations for horizontal wells with significant increases in production and ultimate recovery. Our technology reduced fresh water demand and lowered flowback wastewater requiring treatment. The net result: substantial savings in $$$$$ What we are selling 36 bbl/day (2600 ft) 50 bbl/day (480 ft) The Old Way: Other consultants use petrophysics statistical methods based on conventional oil and gas formations. These methods yield very poor results when applied to unconventional (shale) formations. As a result, the Client ends up overfracking a wide vertical range, at a very high cost, and with a very low resultant daily production. The Better Way: Our Technology uses proven petrophysics statistical methods based on unconventional oil and gas formations. These methods are the only available methods in the marketplace that can calculate production in bbl/day/100 ft, with an accuracy of 10-20%. Financial Benefit: The Client s benefits include: Level I Level II Level III Identification of best vertical zones Cost savings and cost avoidance Increased value of reservoir Our services essentially lower the breakeven price of crude oil for reservoir development. 8
Example Texas Permian Basin Example Texas Permian Basin Production estimates from cutting analysis takes several months Our typical assessment can be completed in as little as two weeks 9
Example: Applying the Technology 33 BOPD Select the formation and entry point for horizontal wells from the two main candidate formations: Wolfcamp A 0BOPD Cline Selecting the best locations for horizontal wells 10
Actual Production vs Our Calculated Production 25.00 Permian Basin Vertical Wells n = 46 wells (bbl/day/100 feet) 20.00 15.00 10.00 5.00 0.00 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546 Actual Production Calculated Production The accuracy of production prediction 25.00 C a l 20.00 c u l a t 15.00 e d P r 10.00 o d u c t 5.00 i o n Production Prediction from log data bbl/day per 100 ft.. R = 0.93 Actual Production 0.00 0.00 5.00 10.00 15.00 20.00 The technology has been verified in 100 Permian Basin wells Greater predictive power Understanding the reservoir Calculated and average production on per well basis (bbl / day per 100 ft) 11
Well Production Comparison 3 51 40 68 58 102 42 60 50 42 32 Increased production in the wells that used our production profile (green) for locating fracking stages 27% 17% 143% 20% 31% Average production increased for five groups with 22 wells is 48% Technology Applications Field Development Optimization based on 3D model of recoverable hydrocarbons Unconventional Resource Evaluation to identify real potential This translates to VALUE for operators, land acquisition experts, mineral resource groups 12
Our Services Our key to success Proprietary Algorithms and Permeability Data Large Data Base of Similar Projects Successful Projects That Save Money 13
Our technology: Shows operators where to frack vertical wells and where to drill horizontal wells, without overkill. Eliminates unnecessary fracking stages to reduce costs and environmental impact. Provides data to optimize field development that could drive dramatic improvement in recovery efficiency and total production. 27 Getting Started 14
How we can help you Level I Petrophysical Analysis Assess and evaluate reservoirs and fields in terms of preferred locations to drill and frack, thereby saving money (drilling, fracking, fresh water demand, treatment of flowback water, logistics, field expenses) Level II Energy Partner Partner with you to optimize the reservoir in terms of recoverable hydrocarbons, increasing the active life of the reservoir, and increasing the value of the field If we can increase the amount of recoverable oil or gas from 5% to 10%, or even 20%... what does that mean to you? 15
Required Data Types The minimum data required for our technology is as follows: Gamma Ray Resistivity Logs Neutron and Density Porosity Logs Data which is optional, but helpful, includes the following: Spontaneous Potential (SP) Photoelectric (PE) Index Sonic Porosity Caliper Log Results of Rock Eval Pyrolysis Analysis Overview Step 1 Determine if the open hole log data required for the process is available. Step 2 Select 2 sets of wells (1 for calibration and 1 for testing) Step 3 Determine correlation between calibration/test wells and results from proprietary analysis. Step 4 Provide results validating the technology and showing most productive zones of movable hydrocarbons. 32 16
Typical Work Process (Once availability of Open-Hole Log Data is verified) Step 1: Determine suitability of wells for Calibration Minimum of 5 calibration wells with 10 or more being preferable The same or similar fracking technique should have been used for all wells in the calibration and test well set Wells should be chosen such that several have production volumes close to the minimum for the area, and several with volumes close to the maximum Preferred half-mile or less distance between each well Wells where selective fracking was done are ideal, but not required Step 2: Identify Data Types Needed for Calibration Log data in LAS format and production history in Excel format Measured Depth (MD) for each perforation interval MD for tops of all geological formations in the interval of interest Map showing calibration and test well positions (coordinates are not required) 17
Step 3: Determine set of Test Wells (most criteria identical to calibration wells) Two or more test wells should be selected Same or similar fracking technique that have been used for calibration wells MD for each perforation interval MD for tops of all geological formations in the intervals of interest Log data, but this time without production history (This will demonstrate the effectiveness of our technology.) Step 4: Provide all requested data to us in LAS format / Excel format. Portable flash drive File Transfer Protocol (FTP) Step 5: We will run our analysis of the data. The process of calibration and well interpretation will take about two weeks for the first groups of wells Interpretation of subsequent wells may take as little as one day 18
Step 6: We will provide interpretation based on proprietary analysis techniques. Production profile will show production in bbl/day per 100 feet at each depth interval for all wells in both the calibration and test sets. Our results from test set are then compared to actual production histories for those wells, which validates our technology. The interpretation enables development of 3D models showing recoverable hydrocarbons. Results allow calculation of brittleness or breakdown pressure allowing more accurate cost estimations and economic feasibility of fracking each future zone. Results may show viability for re-fracking calibration and/or test wells. Step 7: We will then work with the client to determine sets of additional wells for analysis and interpretation at a negotiated per-well price. Contact Information Randy D. Horsak, PE (281) 752-6700 rhorsak@marcellusshalewatergroup.com Dr. Gary L. Sorensen (814) 321-5033 gsorensen@marcellusshalewatergroup.com Charles Gray (713) 320-3521 cgray@marcellusshalewatergroup.com Marcellus Shale Water Group, LLC Warriors Mark, Pennsylvania Houston, Texas Austin, Texas Sugar Land, Texas 19