Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information Rev. 0.C Sept. 2016 AN INTRODUCTION TO OIL AND GAS WELLS RECOVERY AND INCREASED PRODUCTION TECHNOLOGY BY USING HYDRO SLOTTING PERFORATION (HSP) INTEGRATED WITH ENHANCED OIL RECOVERY INTENSIFICATION (OWC EOR) A revolutionary technology of increasing oil and gas profits even at today market prices by using proprietary well recovery methods applied to depleted and/or abandoned wells All rights reserved Web: www.oilwellslotting.com Yuri Frankel, Co-founder, VP, Director of Business Development: [email protected]Phone: (646) 831-5341 Dr. Leon Marmorshteyn, Senior Science and Technology Advisor: [email protected]CONTACT INFORMATION
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Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016
AN INTRODUCTION TO OIL AND GAS WELLS RECOVERY
AND INCREASED PRODUCTION TECHNOLOGY BY USING
HYDRO SLOTTING PERFORATION (HSP)
INTEGRATED WITH
ENHANCED OIL RECOVERY INTENSIFICATION
(OWC EOR)
A revolutionary technology of increasing oil and gas profits even at today market prices
by using proprietary well recovery methods applied to depleted and/or abandoned wells
All rights reserved
Web: www.oilwellslotting.com
Yuri Frankel, Co-founder, VP, Director of Business Development:
Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016
HSP Slot Drainage Area
Calculation
2
• The United States has an estimated 771,000 stripper or marginal wells (wells with less than 10 barrels a day output) still in production - about 410,000oil and 361,000 natural gas wells. Combined, these wells make up almost 20% of the total of all oil and natural gas produced domestically: 11.3% foroil and 8.3% for natural gas.
• Over the past decade a cumulative total of more than 131,000 oil wells and 48,000 natural gas wells have been plugged and abandoned with a totalmarket value of lost annual production estimated at $6.1 billion for the year production ceased. Currently over 1.2 million wells are alreadyabandoned or approaching abandonment.
• Many of the abandoned wells have never undergone waterfloods or tertiary extraction techniques and are being abandoned with a significantamount of oil resources still in place: from 60% to 75%.
• Currently there is an increasing demand for a sustainable source of oil well profitability as result of oil prices crashing
• In the US hundreds of small and medium operators constitute a multibillion oil market. Information on oil production in the US by state can be foundin the US Energy Information Administration: http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm
• As a rule, marginal wells could already have exploration and drilling equipment, storage tanks, access roads and other production facilities, commonlyreferred as infrastructure, and require mainly maintenance investments and minimum capital investment.
• Profitability of marginal wells recompletion, even with low maintenance expenses to keep up their infrastructure while using old technologicalmethods, could easily become marginable too and/or not feasible.
• Even abandoned wells can be unplugged and restored to productive levels at minimal costs using the HSP technology.
Sources: Interstate Oil & Gas Compact Commission, U.S. Energy Information Administration, Stripper Well Consortium, National Energy Technology Laboratory
Market Overview
Important Facts to Consider About HSP and Its Implementation
Advanced Technology
OWC Engineering Highlights
OWC is an expert in oil and gas wells recovery, especially in the HSP technology, with a drive to succeed. OWC has an exclusive relationship and support from a special HSP Technical Advisor: one of original HSP inventors from Russia
and who is now permanently resides in the US. OWC works closely with subcontractors who already successfully used the HSP technology in the US and Canada.
There are tangential stress conditions that occur in any well after drilling due to rock pressure created by a weight of theoverlying rocks: they create annular zone with compressive stresses near wellbore, thus collapsing rock’s permeability andrestricting access to the prospected hydrocarbons.
The HSP is the only method on a market that relieves these stresses by using a high pressured water and sand mix in 4 abrasivejet streams (at 90° to each other) to create 4 deep wide opened channel slots through the wellbore: to allow a greatly increasedflow of production layers hydrocarbons right through the annular stress zone around the wellbore; no other competingEnhanced Oil Recovery (EOR) method could do it.
The HSP creates vertical slots which will redistribute tangential stress and restore rock’s permeability while providing a goodhydrodynamic connection between well and productive layers.
The HSP can be used to recomplete vertical wells previously opened with guns and cumulative perforation technologies and itworks best on the wells with depths in excess of 1000 ft.
Integrating the HSP with other Enhanced Oil Recovery (EOR) intensification technologies will provide a complete solution inextracting a majority of hydrocarbon deposits still locked in the well. OWC patented integration approach presented in theOWC the EOR operational Diagram.
The HSP technology is a cost saving alternative to horizontal drilling and fracking technology introduced by Mitchell Energy &Development (now Devon Energy) Co and used by Chief Oil & Gas Co.
The HSP technology should be used in new well completion process instead of cumulative perforation and will guaranteesustainable well’s production life with a very low rate of output depletion.
Suggested Actions
Blending an existing well infrastructure with OWC innovative eco-friendly HSP technology will be able to boost well’sproductivity and access remaining oil and gas deposits. There are no doubts that markets will be attracted to OWC engineeringsolutions, particularly at this time when operators and service companies are looking to balance their books to accommodatelower oil prices.
OWC HSP Related US
Patents
Current Patent: No 5,337,825 “Method of oil well productivity increase” by L. Marmorshteyn, et. al. Pending Patent: No 15,208,238, “Method for increasing productivity of oil and gas recovery from previously used wells.” by
L. Marmorshteyn, et. al.
HSP Technology
Achievements
The HSP technology was originally developed and effectively used in oil and gas fields of Russia and it also had proved itself around the world: in China, USA, Canada, Middle East, and South America.
Results from over 200 HSP recompleted wells showed production rate increases up to 10 times and frequently much more.
The HSP opens a large drainage zone, creates a perfect hydrodynamic well connection with oil reservoir,and set up an excellent geometry for subsequent hydraulic fracturing in production and injection wellswhile restoring a normal pressure in producing well’s drainage surface area (DA) for all 4 HSP slot jets:
DA = 4 x (2 x (a x b) + 2 x (a x c) + (b x c)) Assuming that each slot depth (a) is 5ft. (max), length (b) – 10 ft. and width (c) – 1 in. (0.08 ft.), then total
drainage area will be: DA = 4 x (2 x (5 x 10) + 2 x (5 x 0.08) + (10 x 0.08)) = 406 ft2 (w/out area along shaft). No other competing EOR technology is capable to produce such a large surface drainage area!
Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016
• Leon Marmorshteyn, Doctor of Science, Member ofthe US Science Academy is one of the original HSPtechnology inventors in Russia, leads our researchand development of new hydroslotting methods foroil and gas recovery industry and serves as OWCTechnical Advisor for wells recovery projects.
• He is a world renowned geologist and expert in wellproductivity enhancement. He is an author or co-author of more than 60 patents on productivityenhancement of oil, gas and liquid mineral resources,with coverage in Europe and USA. He also wrote145+ articles on the usage of various technologies inthe oil, gas, and liquid mineral well production.
• Our engineering and deployment team is comprisedof geologists and engineers with many years ofexperience in oil well recovery and enhancement andengineering.
Business Profile Technical Advantage
• OWC is focused on providing its customers with asuite of patented hardware, field operations andconsulting services focused on oil and gas well yieldenhancement.
• OWC core technology is HSP, which is an eco-friendly, cost effective and proven solution formaking conventional wells more productive andextending economic life.
• Yield improvements vary based on geologicalconditions, but increases from 3x to 10x are typicaland in some cases much more, with most dramaticproduction increases from zero productivity wells.
• Our technology and methods rely on an existingconventional infrastructure and are maintained andserviced by a team of industry operation experts.
3
Surface Equipment And Stages of HSP Process
• Ecologically safe and environmentally friendly long distance directed fracture up to 1500 feet.
• Intersects new “compartments” of additional reserves.• Fracture width is minimum 6x larger due to Hydroslotting
radial depth. • Increases Porosity: 4-5x and more; Permeability: 15x and
more.• Drainage volume increases 6.2x greater than conventional.• Creates deeper penetration comparing to perforation
methods.• Eliminates screenouts, lamination, skin effects (all barriers)• Reaches full thickness through interbedding / layer.• Powerful enough to cut multiple casings deeper into rock in a
wide vertical and radial depths: wider than other technologies.• It is the only technology that actually excavates rock before
fracturing.• Accurate and controllable connection / communication
between wellbore and formation. • Direct method for oil, gas, and water (effect is immediate).• Helps giving direction to hydraulic fracture (even near water).• Does not crack casing cement and keeps hydraulic integrity.• Has a long lasting effect of 5 to 10 years after well treatment.
HSP Technology Characteristics And PossibilitiesUNDERGROUNDPERFORATOR
RadialDepth
VerticalDepth
Cumulative Perforation vs. HSP: Side and Top Views Well Depth Effect on Pressure Inside Well and Rock Permeability
Well's
Depth (ft)
Pressure (psi)
1000 1450-2900
2000 2900-5800
3000 5800-8700
4000 8700-11600
5000 11600-14500
6000 14500-17400
7000 17400-20300
8000 20300-23200
9000 23200-26100
Rock P
erm
eabili
ty
Well Depth
Well
Pre
ssure
Hyd
rosl
ott
ing
Per
fora
tio
n
Side View Top View
Cu
mu
lati
ve P
erfo
rati
on
Shaft’s cementcasing is brokenthrough alongwith annular stress zone
Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016 4
2 Types of the HSP Perforators HSP vs. Commonly Used Perforations
Item Price Qty Units Total Price
Well Preparation Services (w/ Personnel, Equipment, Consumables, Work)Wireline Service Subcontracting $ 4,000.00 1 per well $ 4,000.00
Workover Service Subcontracting $ 25,000.00 1 per well $ 25,000.00
Fracking Service Subcontracting $ 25,000.00 1 per well $ 25,000.00
Total Well Preparation Services: $ 54,000.00
Basic OWC HSP Services (w/ Local Support)
HSP Subcontractor Fees (Jet Slots Cutting) $ 40,000.00 1 per well $ 40,000.00
HSP Subcontractor Local Support Brigade $ 1,200.00 5 days $ 6,000.00
Total for Basic HSP: $ 46,000.00
OWC Personnel and Services (w/ Analysis, Organization, Travel, Insurance)
Well's Geological Analysis $ 3,000.00 1 per well $ 3,000.00
All Inclusive Travel, Local Accommodations for a Week and Insurance Expenses $ 7,000.00 1 per well $ 7,000.00
Organizational and Coordinating Work Compensation $ 10,000.00 1 per well $ 10,000.00
Total OWC expenses: $ 20,000.00
Gross: $ 120,000.00
Basic HSP Well Service Treatment Cost Estimates (End of 2015)
Prices may quite vary in different regions and also due to oil market service competition
Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016 5
OWC EOR Operations Diagram
Production Increase Greatly Depends on Well’s Type and Rock Formations
OWC Structural Diagram
1 Close micro cracks produced by the cumulative
perforation by using cement closing solution
(bentonite drilling mud): to prevent water inflow
into the well.
2 Create 4 deep slots through the wellbore over an
entire thickness of producing layers will restore
producing layer permeability and open channels for
oil inflow into well. This is mandatory for any
following EOR operations.
3 Induce the micro cracks in a large volume of the
producing layers by plasma pulse electrical
discharge or acoustic blast: to open oil passage from
closed pores.
4 Fracture a large volume of the producing layers
by applying pressurized jet stream (water and sand
mix) into the previously created slots: to open
closed pores containing oil still unattainable by the
other EOR methods. Additional ecologically neutral
solution, like baking powder, may be added.
5 Restore and maintain pressure in the producinglayers by allocating injection wells next toproduction wells: cutting slots in the injection wellsby the HSP operation and applying Hydraulicfracking and pressure controlled water flooding.
Business Development
Yuri Frankel
HSP EquipmentEngineering
Service
Well Assessments, Operation Planning
OWC Management
Science and Technology Dr. Leon Marmorshteyn
HSP
Process Design
Rigs and Pump Preparation
HSP
Assembly Test
Geological Consulting
Other On-site Equipment
WellsHistorical Database
WellsTreatment
Service
Slotting Operation
Wireline Service
ProductionBase Units and Consumables
Suppliers in Canada, US
and RussiaHSP Process Control Other On-site
Equipment
Surface
Equipment Assembly
Field Service TeamMaxxwell Production
CEO: A. Nikulin
Barrels/day
ServiceOptions
Pro
du
ctio
n In
crea
se
Tertiary Recovery
Well’s Cement Sheath Restoration
Pressure Management
Injection Well HSP Treatment
HSP 4 Slots Cutting
Micro Cracking Hydraulic Fracking
Water Treatment Flow Intensification
Unloading Stress in Near Wellbore Zone
Hydro Fracking, Ecologically Neutral Solutions
Plasma Pulse, Acoustic Blasts
Secondary Recovery
Production WellTreatment Service
1
2
3
4 5
HSP 4 Slots Cutting
Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016
Average Well's Purchase Price US Dollars $50,000
Average HSP Treatment Expenses (from an above Table) US Dollars $120,000
Total Initial Investment per Well US Dollars $170,000
Total Initial Investment per 100 Wells US Dollars $17,000,000
Investor's Shares in Purchased Well's Revenues %/year 70.0%
Return of Investments (ROI) after Purchase and HSP Months 8.7
Investments Returns per Year After Sharing w/OWC @$40/barrel Well's investments
Average well's working days per year:Average HSP Depth /Well (ft):Data provided by Dr. L. Marmorshteyn
Price per barrel: Max Return of Investments−ROI (days):
Number of wells: Average ROI (days):Average Estimated HS Cost / well:
Oil Well Consulting, LLC (OWC) Proprietary and Confidential Information
Rev. 0.CSept. 2016 9
Suggested Field Trial of an Integrated OWC EOR Applied to the Depleted Conventional Wells
Suggested OWC EOR
Steps
OWC EORExpected Oil Output Gains
Field Trial Background
The OWC advanced technological approach is invented to extract the most of the 70 percent of oil deposits still remaining theground after primary and secondary recovery and unattainable by the other conventional EOR methods
Theoretical and field studies had demonstrated that the HSP treatment resolves annular stress conditions near wellbore zoneexperienced by every conventional well (production and injection) if completed with gun and cumulative perforations. Thestatistical data available to OWC strongly validates the HSP cost efficiency done on depleted wells in low price oil market.
The US oil exploration industry and academia neglected available data and the major role of stress condition around thewellbore zone and necessity of the HSP treatment as prerequisite to other known conventional methods of the EOR.
OWC EOR introduces techniques to manage the decreased reservoir pressure after decades of oil exploration and to access tothe closed pores across entire volume of the producing layers. Despite of the potentials to extract a large quantities of oil, thefield study of our integrated solution as a whole had never been done before at the US oilfields.
Hydraulic fracturing after the HSP is performed will be much easier and with much less working pressure: along directionscreated by jet slots. The HSP slot opening contributes to an increase of well surrounding rocks permeability, thus to anincreased quantity of oil output.
In the production wells it is scarifying a large volume of the producing layers and is releasing an unattainable oil from closedpores. The created slots open an easy passage for released large oil flow down to the well shaft. Otherwise, oil is locked in theformation and is not able to reach well’s shaft because of an annular stress ring. The HSP gain is expected to reach 9-25 timesof an original depleted well levels.
In nearby injection wells their pressures will be set to normal levels needed to maintain production layer working pressure. Ifan ingestion pressure is currently at 1000 psi, then after the HSP it could go down to 250 psi. The restored reservoir pressurewill push oil to the neighboring production wells, oil in neighboring wells will begin to rise, and correspondingly there will be anincrease of the produced oil in all neighboring wells. After the HSP of the nearby Injection well – production well will raise oiloutput at 2-3 times.
Restored working pressure in the producing layers after slot cutting and hydro fracking will raise oil output in connected wellsup to 2-3 times. These results will be achieved by an injection of water or gas.
Plasma Pulse Discharge creates micro cracking in the rock formation. This method was invented and tested in Russia and the USas an alternative to a Hydraulic Fracturing. The results of its field applications demonstrated the rise of an oil output inproduction well of 4-5 times. The effect was short lived because its damage to the well’s casting and the formation in nearwellbore zone. However, slots created by the HSP will direct Plasma’s discharge direction and prevent well’s shaft damage.
OWC EOR Operation
Expected Gain
Values
Selected Minimal Values
1 Depleted well (barrels/day) 1 1
2Production oil well output gain after basic HSP (times)
9 -25 9
3Production well output gain after Injection well HSP (times)
2- 3 2
4Production well gain after Micro cracking Plasma Pulse (times)
4-5 4
5Production well output gain after Hydro fracking (times)
2-3 2
Total single well output gain (barrels/day) 144
Production wells after the basic HSP treatment will be able to raiseoil output from 1 barrel/day to 9- 25 barrels/day. For example,see results of the HSP treatments at Saskatchewan (Admiralty Oils,Ltd) and Nebraska (Branch Production, LLC) on page 6.
Using all the above data – please note probable well’s gain after allEOR treatments shown in the table on a right.
These calculations were made only for a single production well in avicinity of an injection well; multiple wells around treated injectionwell are expected to produce similar or larger gains for each ofthem.
Expected Revenue Increase
Average Treatment Expenses per Each Well US Dollars $120,000
Number of HSP Treated Wells Qty 3 2 Production and 1 Injection Wells
HSP Cost for All Treated Wells US Dollars $360,000
Additional EOR Treatments (Plasma + Hydro fracking) US Dollars $120,000
Total Cost of OWC EOR US Dollars $480,000 Note1: First production year revenue is reduced by OWC EOR treatment costs
Projected Minimum Price per Barrel US Dollars $40 Note2: OWC EOR will still be profitable even at $10 per barrel oil price
Average Oil Output Before OWC EOR Treatment Bbl/day 1
Expected Oil Output After OWC EOR Treatment Bbl/day 144
ROI after OWC EOR Treatment Months 3.2 Production Years 5 Years Total EOR
Cost
Total EOR Revenue
Gain1 2 3 4 5
2 Production Wells Projected Revenues Before OWC EOR Treatment: $24,500 $23,375 $22,111 $21,006 $19,955 $110,847
2 Production Wells Projected Revenues After OWC EOR Treatment: $3,024,000 $3,327,600 $3,160,020 $3,000,819 $2,849,578 $15,362,017 13759%
THE BOTTOM LINE: COMPARED WITH OTHER EOR TECHNOLOGIES OWC EOR WILL PROVIDE THE BEST PROFITABILITY AND LONGEVITY
Field Trial Objectives
Try to attract $500K to $600K of investments and a partner who will be interested in commercialization of the HSP integrated solution proposed by the OWC.
For the purpose of the commercialization run a field test in order to: o support all projected benefits and feasibility of the OWC EOR integrated solutiono establish a real quantity of an extracted oil and OWC EOR profitability at a current low cost oil market