Reservoir Characterization

KIC Oil & Gas Consultants

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Reservoir Characterization is a Multi-Disciplinary Analysis

1. Geologic Analyses Incorporates:Core and DST Data, Well Log Interpretations, Sequence Strat Well Log & Cross Section Interpretations.

4. Geophysical Evaluation & Interpretation Incorporates: Structural Evaluations; Fracture Analysis (Derivative Mapping); Microseismic; 2D & 3D Seismic Evaluations & Interpretations for Sequence Strat/Facies Analysis & Modeling; and Reservoir Evaluations & Modeling/ Analyses/Interpretations. We can work with your geophysics team or provide consultants.

Integrated Reservoir Models Incorporate All of These Analyses

3. Source Rock Evaluation & Rock Mechanics Incorporates: Hydrocarbon Source Rock Evaluation & Typing (Organic); Core, Core Plugs, & Drill Cutting Sample Analysis for Elemental Rock Analysis (Inorganic, i.e. XRD & Elemental Data); and Conductivity & Proppant Analysis for Completion Evaluations. We provide evaluation and interpretation for these type of data which are than incorporated in the Reservoir model.

2. Geologic Database Analyses can Incorporate: Borehole Temperatures, API, GOR, WOR, Resistivities, etc. These Geologic Attributes can be mapped to Identify High Quality Infill Locations and Sweet Spots that have Greater Producibility.

5. Reservoir Analyses: Including Completion & Drilling Evaluations: Geologic; Geologic Databases; Seismic; Source Rock and Rock Mechanics; and Engineering: Reservoir, Drilling, & Completion Evaluations to Develop an Integrated Reservoir Model. We will work with your Engineering Team to built an integrated Reservoir Model.

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Proposed Project Work Flow for Reservoir Characterizations

1. Geologic Analyses: (KIC will work directly with your geologic and engineering teams)

Interpret existing (available) cores and DST’s; review published reports, articles, Master & Ph.D. Thesis;

evaluate and interpret well logs. Incorporate existing (available) DST data; generate well log sequence

stratigraphic cross sections; develop reservoir stratigraphic fence diagram(s)/3D models; and perform

Look Back Evaluations on selected wells. These analyses will assist in identifying PUD’s (1P, 2P, & 3P

locations) and identifying & high grading infill locations with potential greater producibility. The

deliverables for geologic analyses will consist of at a minimum: geologic maps, facies maps, sequence

stratigraphic cross sections, 3-D fence diagrams, and reservoir type logs. Examples of the Geologic

Analyses are presented on slides 4, 5, 6, 7, 8 & 9.

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Unconventional DST’s:Numerous DST’s have been performed in older wells. These DST’s were performed in conventional wells with the expectations of good hydrocarbon recoveries and pressures. The DST’s that indicated marginal recoveries and pressures were either completed as dry holes or were marginal uneconomic wells. These DST’s are excellent examples of DST’s in unconventional tight oil reservoirs.

Core Resource Libraries:Available for lithofacies analysis for any formation. Lithofacies analysis is critical in the identification of transgressive/regressive systems tracts in well log sequence stratigraphy and the correlation of well log patterns between wells.

Geologic Analysis – Cores & DST’s

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Geologic Analysis – Well Log and Sequence Strat Interpretations, Parkman Sandstone

Location Map - Powder River Basin

Lithologic well Log correlation based on the Formation Top of the Parkman Sandstone. Asa result, there is a great possibility to actually drill through 2 different reservoirs thatmay have different reservoir parameters (oil saturation, pressures, water saturations,etc.) and may yield a well with underperforming results and expectations.Lithologic Parkman top.

Time Chronological well log sequence strat correlation is based on the time chronologicaltop of the identified prospective reservoir. This correlation allows for the properplacement of the horizontal well bore to stay in the target zone in the identifiedprospective reservoir. As a result, expectations for a successfully drilled well areachieved and the potential for a successful completion and well performance expectationsare also achieved.

Sequence Stratigraphic Shelf Modelfor the Powder River Basin

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Lithologic Correlation Time Chronologic Correlation

Geologic Analysis – Well Log and Sequence Strat Interpretations, Frontier/Turner Sandstone

6USGS DDS-69-U, 2010

Upper Permian Sequences, Reinecke Field, Midland Basin

Geologic Analysis – Well Log and Sequence Strat Interpretations, Upper Permian Sequence

QueenQueen

GrayburgGrayburg

San AndresSan Andres

Index Map

Length of Cross Section14 Miles, Well Spacing not to Scale, Vertical Scale 1”=200’ Modified from Rick Sarg, June 2016.

GP1 = Guadalupian Sequence Boundary 1

LD10 = Leonardian Sequence Boundary 10

Transgressive Systems Tract

Highstand Systems Tract

Lowstand Prograding Complex/Wedge

SBSB

SB

SB

LD10

LD10

GP1

GP1

GP2

GP2

GP3

GP3

GP4GP4

GP5GP5

SW NE

Well A Well B Well C Well D Well E Well F

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Geologic Analysis – Well Log and Sequence Strat Interpretations, Niobrara Formation

Sequence stratigraphic cross sections and

lithofacies correlations will be incorporated into

the reservoir stratigraphic fence diagrams/3D

Models, which will be integrated with the Reservoir

Analyses and interpretation.

Geologic Analysis – Reservoir Stratigraphic Fence Diagram/3D Models

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2. Geologic Database Analyses:

Incorporate any previous work acquired by Your Company for detail evaluation and geologic

interpretations. The previous work may include petrophysical analysis, service companies data, such as

BHT, GOR, detail core studies, purchased databases etc. An example of the Geologic Database Analyses is

presented on slide 11.

Proposed Project Work Flow for the Reservoir Characterizations

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An Example: Geologic Data & Database Analysis

The TGS borehole temperature model database can present multiple geologic attributes and assist in the identification of sweet spots and geothermal reservoir compartments. As a result, infill locations can be high graded, volatile oil & gas reservoirs identified, PUD’s identified, timing and migration of hydrocarbons, all of which can result in Greater Producibility.

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CReppe, 2014

3. Source Rock and Rock Mechanic Evaluations:

Existing/available inorganic and organic geochemical and rock mechanic’s data would be interpreted &

incorporated as well as conductivity & proppant data. Additional geochemical (inorganic and organic) and

rock mechanical data may need to be collected but not until the existing data has been assessed.

Deliverables will include: frackability maps (potential of a rock to frack) which includes lithofacies

evaluation, oil migration maps (depending on the data). We provide evaluation and interpretation for

these type of data which are than incorporated in the Reservoir model. An example of the existing Rock

Mechanical Data is presented on slide 13.

Project Work Flow for the Reservoir Characterizations that is Dependent on Existing/Available Data

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Source Rock & Rock Mechanic Evaluation – Geochemical Data (XRD)

Depth Quartz Feldspar Calcite Dolomite Siderite Pyrite Kaolinite Chlorite Illite Smectite

1902 29 8 7 10 2 4 5 7 10 18

1911 13 9 7 5 6 4 12 6 8 30

1914 3 8 2 0 10 5 10 0 5 57

1917 26 7 13 6 2 7 6 7 10 16

1934 28 8 10 8 3 7 6 7 9 14

1935 17 4 20 5 0 16 20 0 10 8

Core Resource Libraries:Available cores will be interpreted, some of which may have inorganic & organic data. This data will be incorporated with the existing log interpretation.

The amount of quartz and calcite is important in determining the frackability of the rock (potential of a rock to frack). Hence, the depths 1902, 1917 and 1934 are going to be much better candidates for fracking than the other depths. The combination of the quartz/calcite and clays will provide evidence to determine the best fracking candidates.

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Project Work Flow for the Reservoir Characterizations that is Dependent on Existing/Available Data, Consultants

4. Geophysical Evaluation & Interpretation:

Evaluate and interpret existing 2D & 3D seismic data for structural evaluations, fracture derivative

analyses, and microseismic. Geophysical evaluations will be incorporated into the geologic evaluations and

the developed reservoir models for the given formation(s). Existing structural interpretations and

reevaluations will be incorporated. Deliverables to include fracture maps, structural traps. We can work

with your geophysics team or provide consultants.

An example of the Geophysical Evaluation is presented on slide 15.

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Existing geologic structural interpretations will be incorporated into the Geophysical Evaluations and Interpretations for structure, fracture & derivative analyses, sequence strat analysis, and reservoir modeling for the given formation(s). Integration of existing of 2D & 3D seismic is required. We can work together with your geophysicists, or provide contractors and integrate seismic interpretation into the Reservoir Characterization Model.

Geophysical Evaluation & Interpretation

Structural lineaments in the Powder River Basin: Martinsen, 2003

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5. Reservoir Engineering Analyses Include Completion & Drilling Evaluations:

Reservoir Engineering evaluations will be integrated with the Geological and Geophysical evaluations for the

given formation(s) Reservoir Characterization Models. The results of this Reservoir Engineering analyses

will assist in identifying and high grading infill locations, potential hydrocarbon sweet spots, and PUD’s (1P,

2P,& 3P) locations for greater producibility. This will yield greater Rates of Return (ROR), Rate of

Investment (ROI), and Net Present Value (NPV) for Your Company. Deliverables will include producibility

maps. We will work with your Engineering Team to built an integrated Reservoir Model. An example of the

potential results of the Reservoir Engineering Analyses which includes drilling and completion evaluations is

presented on slide 17.

Project Work Flow for the Reservoir Characterizations that is Dependent on Existing/Available Data

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EUR BOE

Wells drilled between 2011-2014

Wells drilled between 2014-2015

Niobrara Wells Exhibited Continued Well Performancewith Changes in Drilling & Completion Designs

Cal Reppe, Shirley Sommerville, & Lei Muehlbauer, 2016

North Park Basin – EOG WellOut of Zone, EUR 52 MBOE

North Park Basin – EE3 WellIn Zone, EUR 494 MBOE

Stay In Zone, Avoid a Porpoise Well Path

Reservoir Analyses – Includes Completion & Drilling Evaluations

WELLS

Four of these wells were completedwith Sliding Sleeves, the 3rd wellwas a Plug & Perf completion with720 shot holes; 58,000 to 143,000 bblsof fresh water gel; and 2,700,000 to 3,700,000 #’s of sand.

These four wells were completedwith a Plug & Perf completion; 35 to 49Stages and 870 to 1,470 shot holes;143,000 to 284,000 bbls of freshwater gel and 1,700 to 3,600 bbls acid; and 6,800,000 to 13,200,000 #’s of sand(predominately 40/70 with one well using20/40 sand).

These six wells were completedwith a Plug & Perf completion; 37 to 51Stages and 800 to 1,400 shot holes;215,000 to 277,000 bbls of freshwater gel and 3,100 to 4,900 bbls acid; and 9,000,000 to 18,000,000 #’s of sand(predominately 40/70 with two wells using20/40 sand). 17

Deliverables for the Reservoir Characterization

1. Geologic Analyses: geologic maps, facies maps, sequence stratigraphic cross sections, 3-D fence diagrams, and reservoir type logs.

These will allow for understanding the reservoir lithofacies compartments and their characteristics and identifying sweet spots (directly related to drilling and completion approaches and reservoir economics).

2. Geologic Database Analyses: BHT, GOR, WOR and resistivity maps.

These will allow for identification of geothermal reservoir compartments; volatile oil & gas reservoirs; and potential hydrocarbon timing and migration pathways.

3. Source Rock and Rock Mechanic Evaluations: frackability maps (potential of a rock to frack) which includes lithofacies evaluation.

This is directly related to drilling and especially completion approaches to target sweet spots and rocks with better frackability, oil migration, maturity, frack barriers, i.e., bentonites.

4. Geophysical Evaluation & Interpretation: fracture maps.

This will allow for better targeting and understanding structural component (traps) related to the reservoir lithofacies.

5. Reservoir Engineering Analyses Include Completion & Drilling Evaluations: producibility maps.

This will allow for complete integration and targeting the most productive zones.

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The proposed work flow presented in these slides for the Reservoir Characterization of any formation can be accomplished with the existing geologic, geophysical, petrophysical information, and databases.

The proposed Reservoir Characterization study will be accomplished by a driven, focused oriented Geologic Team consisting of Cal Reppe, Keith McDonald, and Vanja M. Stevanovic, geologists, in addition with Doreena Patrick (geochemist) and Shirley Somerville (reservoir engineer). The Geologic Team’s knowledge and expertise will be utilized to achieve a timely and efficient evaluation of the multiple aspects of any integrated project. In addition, this team is committed to work with the Geophysical and Engineering Teams to deliver a successful reservoir characterization model for you.

The purpose of a Reservoir Characterization is to incorporate existing data from geology, geochemistry (inorganic & organic), petrophysical, and geophysical evaluations with the Reservoir Engineering data. As a result, the multi-disciplinary team will be able to develop a reservoir model/strategy for each producing horizon that will optimize the IP’s, EUR’s, ROR, ROI, NPV, high grade infill locations with greater producibility, and identify PUD’s. Therefore, enhance the overall economics of the reservoirs and the asset. All integrated data can be applied immediately for an overall better performanceIn the current economic climate in the Oil & Gas Industry, a Reservoir Characterization will propagate the true potential market value of any asset for potential interested buyer’s and financial investors. The proposed Reservoir Characterization will improve, enhance, and optimize your economics for any reservoirs target.

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The Reservoir Characterization