Tuscaloosa Marine Shale Activity & Performance Review Mire & Associates, Inc. www.mireandassociates.com
Introduction The Tuscaloosa Marine Shale (TMS) is an emerging oil shale play. Several operators have been drilling and testing horizontal wells since 2011. Well costs are very high ($10-$13+ million) and economic viability of the play has not been established. Mire & Associates, Inc. has analyzed the publically available data to document activity and well results to date. (April 2015) 7/15/2015 2015 Tuscaloosa Marine Shale Study 2
TMS General Information Covers about 2.5 million acres in Louisiana & Mississippi Low acreage cost Numerous vertical wells define oil saturation & rock quality Deep play 10,500 to 14,500 TVD Thickness 100 to 250 Good quality crude 38-45 API Abnormally pressured 0.65 psi/ft. 7/15/2015 2015 Tuscaloosa Marine Shale Study 3
TMS Play Map 7/15/2015 2015 Tuscaloosa Marine Shale Study 4
Total Play - Activity & Results Summary 7/15/2015 2015 Tuscaloosa Marine Shale Study 5
Wells & Results by County/Parish 7/15/2015 2015 Tuscaloosa Marine Shale Study 6
Best Areas Amite & Wilkinson Counties have the most wells & the best production rates 7/15/2015 2015 Tuscaloosa Marine Shale Study 7
Major Leaseholders 7/15/2015 2015 Tuscaloosa Marine Shale Study 8
Results by Operator 7/15/2015 2015 Tuscaloosa Marine Shale Study 9
Completion Summary by Operator 7/15/2015 2015 Tuscaloosa Marine Shale Study 10
EOG had the poorest producing wells Encana had the highest producing wells 7/15/2015 2015 Tuscaloosa Marine Shale Study 11
Encana had the highest reserves per well 7/15/2015 2015 Tuscaloosa Marine Shale Study 12
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Production Rates & Reserves are Improving over Time 7/15/2015 2015 Tuscaloosa Marine Shale Study 14
Well Performance Map IP 30 Green > 750 BOEPD Yellow 300 749 BOEPD Red < 300 BOEPD Rapides Avoyelles Wilkinson Amite West Feliciana East Feliciana St Helena Tangipahoa 7/15/2015 2015 Tuscaloosa Marine Shale Study 15
2015 Wells Completion & Test Rates 7/15/2015 2015 Tuscaloosa Marine Shale Study 16
2015 Wells Reserves Summary 7/15/2015 2015 Tuscaloosa Marine Shale Study 17
2015 Well Economics Leasehold $80,000 Drill & Complete $10,000,000 Facilities $500,000 Total Producer Cost $10,580,000 IRR: 23.5% Payout: 3 years NPV(10): 4,443 M$ Lease Net Revenue 80% Operating expenses $15,000 / month for 6 months $10,000 / month for 6 months $7,000 / month until Ec Limit Prices: June 2015 Nymex Strip Oil Differential 1% Gas Differential 38% Type Curve Parameters Oil Initial Rate (BOPD) 912 Oil IP30 757 Oil Initial Decline 99.57 Oil Hyperbolic Factor 1.40 Oil Minimum Decline 5% Gas Initial Rate (MCFD) 373 Gas IP30 337 Gas Initial Decline 93.50 Gas Hyperbolic Factor 1.10 Gas Minimum Decline 5% EUR Oil: 627 MBO EUR Gas: 277 MMCF 2015 Well performance yields positive economics 7/15/2015 2015 Tuscaloosa Marine Shale Study 18
2015 Industry Reports/Status Goodrich actively drilling & reporting high reserves estimates Halcon May 2015 no mention of TMS Encana May 2015 no mention of TMS (3 wells planned for 2015) EOG May 2015 no mention of TMS Sanchez Energy May 2015 brief mention of TMS Comstock suspended activity Devon sold out to Goodrich in 2014 7/15/2015 2015 Tuscaloosa Marine Shale Study 19
TMS Conclusions Several operators have scaled back operations. Encana has been the most active operator & has the best well results. The best well results were from Amite County Mississippi. 2013 & 2014 well costs were too high ($13+ Million) & reserves per well were too low to make the play economic. Well results are improving & wells costs are declining. 2015 wells - IP 30 of 637 BOEPD & EUR of 683 MBOE. With a target $10 million Drill & Complete cost & current oil prices the wells should be economic in the areas developed in 2015. 7/15/2015 2015 Tuscaloosa Marine Shale Study 20
Engineering Terms BOE barrels oil equivalent of natural gas (6 MCF/BOE) IP 30 estimated average peak production rate over first 30 days EUR estimated ultimate recovery (reserves per well) from hyperbolic decline analysis Stages number of reported frac stages used to complete the well Proppant reported amount of proppant (lbs) used in the fracturing process Lateral length length of horizontal portion of the well 7/15/2015 2015 Tuscaloosa Marine Shale Study 21
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Consultant Diane Seidel Engineering Technologist Summary Mrs. Seidel is an IT professional with more than 18 years of experience in selecting, developing, and supporting scientific computing solutions for the oil industry. She worked as a project manager on systems ranging from Geographic Information Systems, Oracle database design and maintenance, and integrated upstream G&G systems including Landmark and Finder/Geoquest. In 2011, Diane began working as an engineering technologist/reserves analyst for Mire & Associates. Diane is proficient in using Excel and PHDWin to collect and analyze production data in support of reserve reports, field evaluations and royalty acquisitions. She is skilled in using online data sources such as IHS Energy, Drilling Info and various state oil & gas data sites. Experience 18 years Mire & Associates, Inc., Houston 2011 present Arco International Oil & Gas, Plano TX 1990 2000 Arco Oil & Gas Co., Plano TX 1983 1990 E-Systems, Inc., Greenville TX 1982 1983 Education Bachelor of Science in Computer Science, 1982 Baylor University, Magna Cum Laude Graduate coursework in Computer Science 1983 1985 University of Texas at Dallas
Engineering Consultant Femi Olaniyi Petroleum Engineer Summary Mr. Olaniyi is a petroleum engineer with seven (7) years of experience in E&P. Assigned to major oil companies and service companies he has supported, installed and provided training for popular petroleum engineering software applications. He is skilled in decline curve analysis, economics, and software troubleshooting. Femi is proficient with DSS TM, Aries TM, PHDWin TM, Fast RTA TM, and Prosper, Mbal & GAP. Experience 7 years Mire & Associates, Inc., Houston 2015 present Halliburton, Houston 2014-2015 Wipro Technologies, Houston 2010-2014 SAIC, Houston 2008-2010 Education B.S., Chemical Engineering Obafemi Awolowo University, Nigeria 2004 M.S., Petroleum Engineering Missouri University of Science and Technology, 2008
Engineering Consultant Peter Morgan Petroleum Engineer Summary Mr. Morgan is a junior petroleum engineer with two (2) years of experience in E&P. He has worked borehole seismic projects in Egypt, shale fracturing jobs in Pennsylvania and drilling operations in west Texas. He is skilled in data analysis, royalty database creation and cash-flow projections. Peter is fluent in Arabic and English. Experience 2 years Mire & Associates, Inc., Houston 2015 present Halliburton, Midland 2014-2015 Halliburton, Pittsburg 2014 Schlumberger, Cairo Egypt 2013 Education B.S., Petroleum Engineering The American University in Cairo, 2012