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Hydraulic Fracturing with Cryogenic Fluids: Boosting Hydrocarbon

Production While Conserving Fresh Water Resources

2015 International Petroleum Environmental Conference (IPEC)Denver, CO

Water Resources

Presented by: Andre Tweed, Ferus LP

Co-Authors: Murray Reynolds and

Juliana Buendia, Ferus Inc.

November 18, 2015

CURRENT CHALLENGES IN UNCONVENTIONAL FIELD DEVELOPMENT

• Demand growth• Volumes• Number of wells• Water management• Logistics

Slide 2

• Logistics• Well performance• Environmental footprint• Emissions and GHG’s• Truck traffic on county roads• COST!!

0

5

10

15

20

Sta

ge

s (#

)

# Stages

0

200

400

600

800

1,000

We

lls (

#)

Well Count

Montney gas/ average per well YoY

DEMAND GROWTH

Slide 3

2012 2013 2014

0

2012 2013 2014

0

2012 2013 2014

0

5,000

10,000

15,000

Flu

id P

um

pe

d (

m3)

Total Fluid Pumped

2012 2013 2014

0

500

1,000

1,500

2,000

Pro

pp

an

t (t

on

ne

s)

Total Proppant Placed

Source: Canadian Discovery Frac DataBase

15

16

17

18

Average # Stages

-

5,000

10,000

15,000

Average Water Pumped

2014 Montney gas/ average per well

OPTIMIZE JOB SIZE

Slide 4

Source: Canadian Discovery Frac DataBase

15

Average of Well - Stages Actual (#)

Non-Energized Energized

1,500

1,600

1,700

1,800

Average of Well - Total Proppant Placed (t)

Average Total Proppant Placed

Non-Energized Energized

-

Average of Well - Total Fluid Pumped (m3)

Non-Energized Energized

WATER MANAGEMENT

• Water sourcing and sourcing restrictions

• Water transportation

• Water storage

• Water infrastructure investment

• Disposal and recycling challenges

Slide 5

Fox Creek Water Pit

• Disposal and recycling challenges

• Pad sizing

• Hidden costs

NA Water Stress Map

6

• Optimize job size• Energize your wells

Water Based Average

[CAT

EGO

RY

NAM

E]…

Che

mical

s

-1%

Optimize number of stagesOptimize sand tonnageReduce water usage

ALTERNATIVES TO MANAGE CHALLENGES

Slide 7

9,400

m3

5,000

m3

Water Based Average

Fluid Volume

Energized Average

Fluid Volume

Wate

r

90%

Wat

er

24%

Pro

ppa

nt…

[CA

TEG

O…

N2

or

C…

In 2014 on

average, energized

fracturing fluids

volume were ~50%

smaller than water

based fracturing fluids

volumeSource: Canadian Discovery Frac DataBase

10,119,148

10,016,778

14,982,909

4,000

5,000

6,000

7,000

8,000

9,000

Ave

rag

e W

ate

r P

um

pe

d p

er

We

ll (

m3)

WCSB Estimated Total Water Consumption for Completions YoY

REDUCE WATER USAGE

Slide 8

Source: Canadian Discovery Frac DataBase

2,552,223

3,953,434

5,429,895

-

1,000

2,000

3,000

4,000

1,500 1,600 1,700 1,800 1,900 2,000 2,100 2,200 2,300

Ave

rag

e W

ate

r P

um

pe

d p

er

We

ll (

m

Well Count per Year

Energized

Water Based

Bubble size is the estimated total water used YoY (in Million m3)

322,168,052 355,946,136

490,052,109

3,000

4,000

5,000

6,000

150,000

200,000

250,000

300,000

We

ll C

ou

nt

Ave

rag

e N

2 v

ol/

we

ll (s

cm)

WCSB N2 Estimated Usage YoY

500,000

600,000

700,000

800,000

Ave

rag

e N

2 V

olu

me

pe

r w

ell

Estimated N2 use Top Plays YoY

Montney/Doig Gas

Deep Basin Gas

Cardium Oil

Glauconitic Hoadley Gas

Nitrogen Usage Growth in WCSB

FOLLOW PRODUCTIVE INITIATIVES

Slide 9

0

1,000

2,000

3,000

0

50,000

100,000

150,000

2011 2012 2013 2014 2015

We

ll C

ou

nt

Ave

rag

e N

2 v

ol/

we

ll (s

cm)

YearEstimated Total N2 Pumped/ Average N2 Pumped per well (scm)

Total Well Count

Total N2 Well Count

0

100,000

200,000

300,000

400,000

500,000

0 200 400 600

Ave

rag

e N

2 V

olu

me

pe

r w

ell

Well Count

Source: Canadian Discovery Frac DataBase

Kakwa river water usage

REDUCE TRUCK TRAFFIC

Slide 10

$2,500

$3,000

$3,500

$4,000

$4,500($KCAN)

REDUCE COST

Slide 11

Source: SPE 175948

$0

$500

$1,000

$1,500

$2,000

SW N2 Foam E-SW E-WB BI Foam CO2 FoamFluid System

Binary Foam saves $850K and CO2 Foam saves $950K over Slickwater

ENHANCE WELL PERFORMANCE

• Water damage mechanisms:• Clay swelling / softening / movement• Aqueous phase trapping (high capillary pressure)• Proppant embedment• Fracture face damage (fluid imbibition)

Poor cleanup and water recoveries during flowback• Poor cleanup and water recoveries during flowback• Poor proppant transport / conductivity• Lower hydrocarbon rates and EUR’s

Slide 14

ADVERSE ROCK – WATER INTERACTION (VIKING ZONE)

Core Immersed in Bridge Creek 3% KCl WaterCore Immersed in Mcbride dugout water

SOURCE: Baker Hughes

Slide 15

CASE STUDY SHOWING ENHANCED PRODUCTION / REDUCED COST – SPE 175948

• Cryogenic N2 and CO2 used in energized fluid systems provide proven, effective technology to stimulate tight sands and shales

• Non-damaging fluid which greatly reduces water volumes, chemicals reduces water volumes, chemicals and proppants

• Reduces real and environmental costs while maximizing NPV

Source: BMO A&D Drill Bits – October 2011

Slide 16

• Fluid systems analyzedFluid Acronym

Slickwater SW

Energized Slickwater E-SW

Other Water Based Fluids WB

Energized Water Based E-WB

STUDY SCOPE

• >3,500 Hz Montney wells completed to date

• Study criteria:• Montney/Doig Gas• OGR < 75 stb/mmscf• 12 months of production data

Slide 15

Energized Water Based E-WB

Oil Based Oil

Energized Oil Based E-Oil

N2 Foam N2 Foam

CO2 Foam CO2 Foam

Binary (N2+CO2) Foam BI FoamEnergized Fluids < 50% CO

2or N

2

Foams CO2

/ N2

/ Both > 50%

The most comprehensive statistical analysis of the Montney

• 12 months of production data• On Production Date >2010• 1,627 wells met the criteria

34,499

41,166

3 mo Median Production (BOE)

PRODUCTION RECOVERY - 3 MONTH CUMULATIVE PRODUCTION

Slide 16

SPE 175948 • The Full Montney • M.ReynoldsBinary Foams outperform any other fluid on a 90 day basis!

30,098

31,042

- 10,000 20,000 30,000 40,000

Source: Canadian Discovery Frac Database & Accumap integrated through Visage

Flatter slope implies

increased variability

Completion cost doesn’t

include water disposal cost

3,020

2,930

Median Completion Cost (K$)

MONTNEY GAS COMPLETION COST

Slide 17

SPE 175948 • The Full Montney • M.Reynolds

Source: Canadian Discovery Frac Database & Accumap integrated through Visage

Slickwater is consistently the MOST expensive fluid used in the Montney!

3,880

3,482

3,020

0 1000 2000 3000 4000

WHAT WE LEARNED

Slide 18SPE 175948 • The Full Montney • M.Reynolds

Optimize Sand Optimize Sand Optimize Sand Optimize Sand ConcentrationConcentrationConcentrationConcentration

RECENT US SUCCESSFUL APPLICATION

• 2015 - first application of CO2 based fracture fluid in the Bakken fm (North Dakota)

• Over 6,000 tons used in a multi-stage fractured HZ completion

• Stay tuned for results• Stay tuned for results

Slide 21

LOGISTICAL CHALLENGES

• Large volume hydraulic fracturing jobs

- Supply constraints

- Truck traffic

- Site layout challenges

- Sub-optimal product delivery

Slide 20

- Sub-optimal product delivery

- Over-sizing of fracture treatments

- Cost

Ferus North American Operations

OPTIMIZE LOGISTICS

Slide 21

• Proximal Supply- Substantially reduced plant gate price

- Significantly reduced transportation

- Scheduling flexibility; reduced standby

- Reduced exposure to weather & road bans

OPTIMIZE LOGISTICS

• Demand Planning- 24/7 Real-Time Dispatch Services

- Coordinate storage, trucks and product deliveries

- Optimize delivery times through real-time interaction

• Reliable Transportation

Slide 22

• Reliable Transportation- Triple drive axle tractors allowing for larger

capacity

- Typically use tandem tractors requiring two trailers

• On-Location Storage

• On-Site Service - Field supervisors

INTEGRATED SOLUTIONS

• Holistic approach to solve the problem

• Technical services• Optimize job size• Improve fracturing fluid design

• Partner with experts• Supply

Logistics

Slide 23

• Logistics• Transportation

• Reduced costs

• Reduce environmental Impact

• Enhanced well productivity and economics

Questions?

• Contact info: andretweed@ferus.com• info@useco2.com• Office: 303-293-1988