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BASICS OF GAS DRILLING OPERATIONS IN TEXAS

Eagle Ford Shale PresentationAugust 31, 2011

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Natural Gas is Found in Shale Deposits

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Eagle Ford ShaleReserves - Texas

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HISTORY OF DRILLING

Vertical Stem Drilling

Slant Drilling

Horizontal Drilling

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Water Aquifers

Oil/Gas Seams

Vertical Stem Drilling

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Slant Drilling

Water Aquifers

Oil/Gas Seams

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Horizontal Drilling

Water Aquifers

Oil/Gas Seams

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Horizontal Drilling

Water Aquifers

Oil/Gas Seams

With Multiple Veins

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Horizontal Drilling

Water Aquifers

Oil/Gas Seams

With Multiple Veins & Multiple Decks

Oil/Gas Seams

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PHASES OF THE DRILLING OPERATION

Site Preparation

Drilling Rig Installation & Operation

Wellhead Establishment & Rig Removal

Site Cleanup

Site Reclamation

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SITE PREPARATION

Field Survey

Construct Access Roads

Construct Drilling Pad

Construct Mud Pits Excavate Mud Pit Construct Liner Membrane

Install Utilities Water for Production

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DRILLING OPERATIONS Drill Rigs are approximately 120 to

145 feet tall and have the following components

Derrick Turntable Blowout Preventer Casing Drill String Drill Collar Drill Bit Mud Pumps

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ANATOMY OF A DRILL RIG

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BLOWOUT PREVENTER

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MUD PITS & LUBRICATING SYSTEM

The mud pit is essential to providing lubrication to the drill bit. The mud is pumped into the drill shaft, used as a lubricant, recycled back out to the mud pit where sediments settle out, and then pumped back into the drill shaft.

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STANDARD DRILL RIG

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Truck MountedDrill Rig

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FRACTURINGFracturing is a process in which the rock is fractured under high pressure in order to open the reservoir and allow more fluid or gas to flow out.

The objective of fracturing is to increase the amount of exposure a well has to the surrounding formation and to provide a conductive channel through which the fluid can flow easily to the well.

A hydraulic fracture is formed by pumping a fracturing fluid into the well bore at a rate sufficient to increase the pressure downhole to a value in excess of the fracture strength of the formation rock. The pressure then causes the formation to crack which allows the fracturing fluid to enter and extend the crack further into the formation. In order to keep this fracture open after the injection stops, sand is added to the fracture fluid. The sand is carried into the fracture and provides enough spacing to allow gas to flow freely to the well head.

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WELL COMPLETION

Once the design well depth is reached, the formation must be tested and evaluated to determine whether the well will be completed for production, or plugged and abandoned.

To complete the well production, casing is installed and cemented and the drilling rig is dismantled and moved to the next site.

A service rig is brought in to perforate the production casing and run production tubing. If no further pre-production servicing is needed, the Christmas Tree is installed and production begins.

Well completion activities include: Conducting Drill Stem Test Setting Production Casing Installing Production Tubing Installing Other Necessary Tanks & Equipment Starting Production Flow

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THE CHRISTMAS TREE

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MERRY CHRISTMAS TREE

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SITE CLEANUP

After the well is completed and the Christmas Tree installed, the site cleanup will commence. This will include:

Removal of all equipment; Environmental cleanup of any incidental spills; Filing in and remediation of the mud pits; Installation of fencing Installation of landscaping (if required); Final site inspection

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SITE RECLAMATION

Site Reclamation is performed after the well is no longer in service. A well that has been “shut in” for 12 or more consecutive months must be reclaimed. This will include:

Removal of all equipment on the site; Plugging of the well; Cut off the pipe three (3) feet below the ground surface; Restore property back to original condition; Inspection by the Texas Railroad Commission.

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