June 20, 2014

Mark K. Boling President

HYDRAULIC FRACTURING OPERATIONS:

SEPARATING FACT FROM FICTION

Development Considerations

1

Surface Considerations

Subsurface Considerations

Surface Considerations

2

Air Emissions

Water Use Water Handling Water Reuse & Disposal

Surface Impact • Drilling Locations • Truck Traffic & Road Damage • Infrastructure

Subsurface Considerations

3

Protecting Underground Water Resources

Frac Fluid Disclosure

Protecting Underground Water Resources

4

Well Integrity Is the Key!

Well Integrity

5

Well Construction Standards 2 Evaluate Stratigraphic Confinement 1

Evaluate Mechanical Integrity of Well 3 Monitor Frac Job & Producing Well 4

4000’ of Sediment

Surface Casing 550’

400’ Usable Fresh Water

2100’ Various Atoka Sands & Shales

1300’ Upper Hale

600’ Morrow Shale

Hindsville

300’ Fayetteville Shale

Evaluating Stratigraphic Confinement

6

Cross sectional view

Virtually all fresh water wells are less than 500 feet deep in the Fayetteville Shale area

Thousands of feet of rock separates the Fayetteville Shale from shallow, freshwater zones

Evaluating Stratigraphic Confinement Shallow Wells and “Frac Hits”

7

850’

400’ Usable Fresh Water

300’ Fayetteville Shale

450’ Atoka Sands & Shales

Abandoned Well

Transmissive Fault

In most shallow formations (less than ~2,000’), the hydraulic fracture will propagate in a horizontal direction.

Cross sectional view

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

TARGET PRODUCING ZONE

GOOD MECHANICAL INTEGRITY

CEMENT CHANNELING

PRESSURE BUILDS UP

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

TARGET PRODUCING ZONE

CAS

ING

CEM

ENT

FOR

MAT

ION

Surface Considerations

10

Air Emissions

Water Use Water Handling Water Reuse & Disposal

Surface Impact • Drilling Locations • Truck Traffic & Road Damage • Infrastructure

Regulating Air Emissions

11

Reduction Technology • Catalytic reduction • Ultra-low sulfur diesel fuel • LNG and CNG fuels • Oxidation catalysts • Green completions, vapor recovery

units, low bleed/no bleed pneumatic devices, plunger lift systems, leak detection

Emission Type • NOx • SO2 • CO • Particulates • CH4 • VOCs (incl. BTEX)

Emission Levels • EPA • Industry • State regulators • Research groups

Water Issues

12

Water Use Water Handling Water Reuse & Disposal

13

US Shale Resources

14

USA Baseline Water Stress

Water Use Issues

15

Location, Rate & Timing of

Withdrawals Cumulative Impact

Assessment

15

Volumes Needed

Water Handling

16

Trucks vs. Pipeline • Truck Traffic • Road Damage Impoundments vs. Tanks

• Closed-Loop Drilling Systems • Recycling Logistics • Air Emissions

Tracking Wastewater • Characterize Wastewater • Record Volumes Produced • Verify Volumes Delivered

Water Reuse & Disposal

Water Recycling & Reuse • Volume and quality of wastewater • Chemical compatibility • Storage and transportation logistics

Water Treatment Facilities • Flowback & produced water

chemistry • Capacity & Capability limitations

(NORM, DBPs, heavy metals) • Central vs. drill site facilities

Water Disposal Wells

• Geological & hydrological limitations • NIMBY concerns • Triggered seismicity considerations

17

25,000’

IGNEOUS BASEMENT

LIMESTONE

SHALE

TRIGGERED SEISMICITY WATER DISPOSAL WELL WATER DISPOSAL WELL HORIZONTAL SHALE WELL

SAND

The largest recorded seismic event generates the same amount of energy as would be released when dropping a gallon of milk from chest high to the floor.

EXISTING STRESS

NEW STRESS

Surface Impact

19

Infrastructure • Compressors • Pipelines • Roads • Water treatment

facilities

Truck Traffic & Road Damage

Drilling Locations • Pit construction • Erosion and

sedimentation • Chemical storage

June 20, 2014

Mark K. Boling President

HYDRAULIC FRACTURING OPERATIONS:

SEPARATING FACT FROM FICTION