Advanced Drilling Systems for EGSMay 2010

NovaTek

Stinger DiamondLoad

Penetrates

1st System Technology: Stinger PDCRevolutionary Cutter• Ultra thick diamond• Innovative conical geometry

Value Proposition• 10X impact strength of conventional PDC enabling

cutter to drill through hard formations• 11X abrasion resistance/wear life of conventional

PDC resulting in longer bit life and less tripping• Cutter versatility enables a multi-formation

bit, drastically reducing bit models and inventory• Presents new mode of cutting the formation that

results in more course/larger cuttings—represents more efficient drilling

• Maintains sharper cutting structure much longer than conventional shear PDC resulting in lower ongoing bit forces while drilling

Milestones Achieved• Performance proven in construction & mining

industry for over 2 years, achieving 30X+ the wear life over conventional tungsten carbide elements

• Multiple TerraTek tests with JackStinger bits drilling under pressurized conditions across multiple formation types successfully completed

• Multiple lab tests successfully completed proving out impact and wear characteristics

Comparison Test – Wear Progression (10 pass increments)

(50 passes @ .050“ in Sierra white granite)

VTL Test Results Comparing Shear & Stinger PDC

0

10,000

20,000

30,000

40,000

50,000

60,000

4,5826,765

52,189

57,429

Linear Distance Traveled (Feet) Before Failure

Unleached Shear Cutter

Shallow Leached

Shear Cutter

Unleached Stinger Cutter

Leached Stinger Cutter

Impact Test Comparison Fa

ilure

Ene

rgy

(J)

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

442RT Straight Impact

(D1128)

442RT Straight Impact

(D1129)

442RT Straight Impact

(D1130)

442RT Straight Impact

(D1131)

442RT Straight Impact

(D1132)

504RT Straight Impact

(D1133)

504RT Straight Impact

(D1134)

504RT Straight Impact

(D1135)

504RT Straight Impact

(D1136)

504RT Straight Impact

(D1137)

562 Stinger Straight Impact

(D1138)

562 Stinger Straight Impact

(D1140)

562 Stinger Straight Impact

(D1141)

562 Stinger Straight Impact

(D1142)

562 Stinger Straight Impact

(D1143)

1218 18 18

2514 18

3020 16

240

220

240

180

200

Drilling Simulation Performance – Sandstone Comparison 5000 psi Confining Pressure

Shear PDC bit at 7740 ft,ROP was ~22 ft /hr

Stinger bit at 7840 ft,ROP was ~23 ft /hr

Stinger bit at 7880 ft,ROP was ~20 ft /hr

PDC Shear bit

Stinger JackBit

JB 8202 Field TestWard County, TX

March 2010

1

3

2

5

4

7

6

9

8

10

2

0

0

JackBit 12.01 Dull Bit Analysis•Ring-out on Stinger 9•Possible junk damage•Possible thermal degradation (brazing)•Overexposed stingers (not seated)

Excessive wear for interior Stingers in 60 ft of drilling (~23 passes on VTL)

Apparent re-melting + peeling failure of high temperature Braze-Bond

Uncharacteristically rough PCD fracture surface

106

10

5

Stinger Bit Dull Report

2nd System Technology: JackHammerElegant Hammering Device• Flow activated hammering mass• Very short sub connected to any modified bit• Hammering mass hits Jack element protruding

from middle of bit

Value Proposition• Jack un-confines formation at borehole center

causing formation failure• Substantial increase in ROP• Small sub can connect to almost any modified bit• Relatively small hammering mass operating at

optimized frequency has diminished effect on other BHA tools

Milestones Achieved & Current Status• Generation #3 prototype built and tested• 30%+ ROP increase achieved while drilling in

cement caissons• Generation #4 tool currently under development• High pressure testing to occur Q4 2009• Field testing in 2010

Oil Reservoir

Turbine

Hammer Mass

Rotating Diverter

Indenter

Rotary Seals

3rd System Technology: JackSteering RSTHigh Performance Rotary Steering Tool• Revolutionary rotary steering tool that uses ‘lead-

the-bit’ technology• Both Intelliserve and mud-pulse compatible

Value Proposition• Shorter length increases proximity of LWD tools to

the drill bit• More cost effective to build; Reduces repair and

maintenance costs• Customised low cost solution can replace

conventional mud-motor / bent-sub based drilling on US land and other onshore locations

Milestones Achieved & Current Status• JackSteering concept proven to achieve industry

standard build rates• Motor driven prototype built and tested successfully• Turbine driven prototype built and tested successfully

achieving 7.5 degree build per 100ft.• Field tests planned for Q3 2010

Variable vanes direct flow into turbine

Turbine speed controls dagger rotation relative to tool collar

Dagger orientation controlled by D&I feedback control loop

Turbine directly drives the profiled dagger via gearbox

Novatek Flow Test Facility

Horizontal Drill Test Facility