Somerset County, PennsylvaniaMarcellus Shale Prospect

Utica Shale ProspectDemonstration of Prospect Potential

Presentation of Primary Geological Parameters Relative to Prospect Area AMI

By Clearfield Energy Services LLCBy Clearfield Energy Services LLCBy Clearfield Energy Services LLCBy Clearfield Energy Services LLC

Northern Somerset Position

Southern Somerset Position

Sequence Stratigraphy of PAEach Stratagraphic Division has Separate Economic Value!

Low Risk Drilling.

The Drilling Method

Horizontal Drilling Basics and Frac

Impact on Environment.

Gas Futures

Low Prices may have economic

opportunity if position is Large.

Latest on Shale Gas. AAPG

9/2012

Why Initial Area of Interest

• Gas Prices where at an all time high.

• Somerset County, Pennsylvania shows all Organic Parameters Necessary for Ultimate Drilling Success.

• The Following is a demonstration of each variable of why and how the Marcellus Shale relates to Somerset County, Pennsylvania as a premier area of Natural Gas exploitation.

Demonstration of Prospect Area Within Key Reservoir Parameters

Somerset Prospect Area

Sequence Stratigraphy of Marcellus Shale

B to B’’ Marcellus Shale Cross Section20078, 20036, 20093, 20092, 20104, 20081

Cross Section C to C’

East C 20189 and 20043 West C’ 20049 and 20059

T.O.C. Map

Primary Fracture Systems

Preparing for Success.

3D Seismic Example.

Guide to Unconventional

Resource Production History.

Based on drilling and completion techniques and supported by production histories generated in the Marcellus Shale.

This example is relative to all Unconventional Resource Production Plays.

Production improving over time and why are illustrated and presented with Actual Production Histories and the Techniques Used over time to achieve these results.

Clearfield Energy Services, LLC

The Year of Horizontal Drilling Success.

Actual 1st Year Production Models

• Production has improved over time due to the

following variables.

• 1.) Staying in the Bottom Section of the

Marcellus throughout the entire drilling

process.

• 2.) Longer Lateral Wells.

• 3.) More Stages with higher sand

concentrations.

Mud systems have allowed drilling totarget in the basal member of the Marcellus.(Union Springs.) This has allowed for 100 % of Frac Job to stimulate Marcellus. Prior Air Hole Drilling forced companies to drillabove Marcellus generating only 30% Frac efficency.

Primary reason for Marcellus Success.

Production Increase over Time.

Why Production Increases Over Time.

In the short history of Marcellus Shale Production, improved technology over

time has improved yearly results consistently from all company reports.

These were several examples of success strategies.

EQT Decline Curve Prior to Improved Drilling Technology.

50 Yr. Res MCF Production Year 1 2 3

7,323,483 Yearly 1,304,210 601,271 432,955

Based on Ave. 1st Year Production Cum Production 1,304,210 1,905,481 2,338,436

Based on Ave. 1st Year Production MCFPD/Year 3,573 1,647 1,186

Average $ per MCF PER WELL $7.50 $7.50 $7.50

Total Revenue per Year PER AVE WELL $9,781,571.94 $4,509,534.98 $3,247,165.05

CUM Revenue per Year PER AVE WELL $9,781,571.94 $14,291,106.92 $17,538,271.97

CUM Land Owner % (18 %) PER WELL Land Owner Royalty $1,760,682.95 $2,572,399.25 $3,156,888.95

Yearly Net Revenue ( 82%) PER WELL $8,020,888.99 $3,833,104.73 $2,760,090.29

CUM Net Revenue ( 82%) PER WELL $4,691,706 $8,020,888.99 $11,718,707.68 $14,381,383.02

Drilling Cost Net Revenue $6,000,000.00 $6,000,000.00 $6,000,000.00

WET GAS $39,039,421 $2,020,888.99 $5,718,707.68 $8,381,383.02

50 Yr. Res MCF Production Year 1 2 3

7,323,483 Yearly 1,304,210 601,271 432,955

Based on Ave. 1st Year Production Cum Production 1,304,210 1,905,481 2,338,436

Based on Ave. 1st Year Production MCFPD/Year 3,573 1,647 1,186

Average $ per MCF PER WELL $4.50 $4.50 $4.50

Total Revenue per Year PER AVE WELL $5,868,943.16 $2,705,720.99 $1,948,299.03

CUM Revenue per Year PER AVE WELL $5,868,943.16 $8,574,664.15 $10,522,963.18

CUM Land Owner % (18 %) PER WELL Land Owner Royalty $1,056,409.77 $1,543,439.55 $1,894,133.37

Yearly Net Revenue ( 82%) PER WELL $4,812,533.39 $2,299,862.84 $1,656,054.17

CUM Net Revenue ( 82%) PER WELL $2,815,024 $4,812,533.39 $7,031,224.61 $8,628,829.81

Drilling Cost Net Revenue $6,000,000.00 $6,000,000.00 $6,000,000.00

Dry Gas $21,023,653 -$1,187,466.61 $1,031,224.61 $2,628,829.81

Economics of NGL’s on EQT Decline Curve.

EQT Production Subsequent to Improved Drilling Techniques.

The Proof is in the Numbers!

Actual EQT Production Subsequent to 1st Decline Curve

Example of improved Technology over time.

Where Are we on this Curve? Still in the last Phase!

Example of Marcellus Project

Example of Marcellus Project

(3 Permits on 1 Pad) 1 Plat Example

Marcellus Shale Conclusions

• Somerset County, Pennsylvania exhibits all the parameters necessary for a successful Organic Shale Play.

• Each variable has been demonstrated to have the highest quality of the parameters.

• Drilling Commitment relative to Susquehanna and Washington Counties, Pennsylvania is necessary to bear similar results.

Utica Shale in Somerset County

• The following is a short description of the

Utica Shale Relative to Somerset County,

Pennsylvania.

• These Maps revel Somerset County to have a

deep and thick Gas Bearing Utica Shale as a

second Unconventional Resource Target.

Sequence Stratigraphy of PAEach Stratagraphic Division has Separate Economic Value!

Regional Geological Utica Shale

Cross- Sections Defining Area of

Interest.

Recalibrating Old Logs to Establish Highest T.O.C.

Ohio vs. New York Terminology

Demonstration of the Variables for the Utica Shale within Project Area.

• Each Slide shows the multiple variables relative to all parameters of encountering and developing a successful Organic Shale Resource Play.

• Total Organic Content and Ro Values are documented throughout the presentation. These values and variables generate the expectation for economic production of hydrocarbons. Lower Valued Areas are expected to be “Wet Gas” Areas and higher values are expected to be “Dry Gas”.

• Natural Fracturing was induced and depicted in the Presentation. Primary variables for natural fracturing regionally was caused by Overthrust Faulting to the East and Istocity from crustal rebound from glaciations to the west. This variable enhances natural permeability.

• Overburden is described visually and Pennsylvania has the most overburden within the entire Appalachian Basin. Overburden is responsible for over pressured formations relative to depth encountered.

• Net Pay Thickness is shown in several Isopach maps. As the Play progresses, more detailed mapping will become available, however, the Utica primary parameters are documented by regional logs and core samples and logically mapped. These maps show the Utica Shale as having primary productive potential throughout the Project Area.

• With each parameter meeting the requirements of an organic shale play, the Project Area has shown all merit for being of the highest quality for organic shale economic potential.

Demonstration of Prospect Area Within Key Reservoir Parameters

References Cited

Hulver, M.L., 1997, Post-orogenic evolution of the Appalachian mountain system and its

foreland: Chicago, University of Chicago, Ph.D. dissertation, 1,055 p.

Patchen, D.G., and 17 others, 2006, A geologic play book for Trenton-Black River

Appalachian Basin exploration: Final report prepared for U.S. Department of Energy,

contract no. DE-FC26-03NT41856, p. 231–240.

Rowan, E.L., 2006, Burial and thermal history of the central Appalachian basin, based on

three 2-D models of Ohio, Pennsylvania, and West Virginia: U.S. Geological Survey

Open-File Report 2006-1019, 35 p. (Also available online at

<http://pubs.usgs.gov/of/2006/1019/>.)

Ryder, R.T., Harris, D.C., Gerome, Paul, Hainsworth, T.J., Burruss, R.C., Lillis, P.G.,

and Jarvie, D.M., 2003, Cambrian petroleum source rocks in the Rome trough of

West Virginia and Kentucky [abs.], in Eastern Section AAPG Annual Meeting

Program with Abstracts: American Association of Petroleum Geologists Eastern

Section, Pittsburgh, September 6–10, 2003, p. 29.

Economic Summary

• Marcellus Production Histories are used as an example to show how Resource Plays improve over time by engineering methods.

• This is the essence of Drilling for Unconventional Resources.

• Low Geological Risk and the ability to Geologically Define Wet vs. Dry Gas Areas are in place for All Geological Targets which are the Utica Shale (Point Pleasant and Login a Members) and the Upper Utica Shale (Doldgeville and Flatcreek Members), The Marcellus, Geneseo and Rhinestreet Shales.

• The Utica Shale is several years behind the Marcellus Engineering Learning Curve, but the Marcellus experience is starting to show in the recent improved public results posted on the Utica Shale.

• Relative to the Marcellus, the Utica is only in it’s 20th Month of finding the right combination of drilling mud's and fracture techniques necessary to compile the ultimate curve that can maximize the true Utica Potential.

• The same is apparent in the Marcellus. Once the formation is understood with more drilling and completion experience, the production has steadily increased logarithmically over time. Peak Production has yet to be established!