American Association of Petroleum Geologists Distinguished Lecturer Sponsored by AAPG Foundation

American Association of Petroleum Geologists Distinguished Lecturer Sponsored by AAPG Foundation AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 0

The Exploration, Appraisal and Development of Unconventional Reservoirs: A New Approach to Petroleum Geology Dick Stoneburner Winter 2013 Formerly: President North America Shale Production Division BHP Billiton Petroleum President/COO Petrohawk Energy Corp. Currently Temporarily Retired/Unemployed AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 1

Brief History of Shale Exploration George Mitchell and Mitchell Energy pioneered shale exploration in the Barnett in the early 1980 s By the late 1990 s they had proven that vertical Barnett wells were commercially viable In the early 2000 s a move was made to drill horizontally in the Barnett, but completion technology was lagging and results were marginal In 2006 the use of isolated multi-stage completions was proven to be successful which was the true game changer for horizontal drilling in shale reservoirs AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 2

BCFE/D Growth of North America Shale Production The development of isolated multi-stage hydraulic fracturing in 2006 caused a dramatic increase in shale production By 2011 the Haynesville Shale surpassed the Barnett as nation s leading shale play 7 Development of isolated multi-stage hydraulic fracturing 6 5 Barnett Haynesville 4 3 2 1 0 Fayetteville Marcellus Woodford Eagle Ford AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 3

Unconventional Exploration Process AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 4

Contrasting the Methodologies of Exploration Conventional Prospect identification focuses outside in Seismic control works outside in Stratigraphic support eventually focuses on facies analysis local to the prospect Reservoir quality issues are relegated to the area of the prospect Unconventional Project identification focuses inside out Seismic control works inside out Stratigraphic support focuses on analysis of the entire basin Reservoir quality analysis is required over a very broad area of the basin AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 5

Prospect Identification: Conventional Analogy K2 Shenzi Prospect Neptune Mad Dog Atlantis Discoveries 0 US feet 20000 Deep Water Gulf of Mexico Prospect Structurally controlled and supported by local analogs At time of Prospect Identification, there were three significant analogs in the area of the prospect The area of the prospect was on the order of 10K acres with Resource Potential in excess of several hundred MMBOE AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 6

Prospect Identification: Unconventional Analogy GUADALUPE BEXAR GONZALES LAVACA WILSON DEWITT FRIO VICTORIA MAVERICK DIMMIT ZAVALA ATASCOSA CHOKE CANYON RESERVOIR LIVE BEE GOLIAD COLETO CREEK RESERVOIR OAK LAKE CORPUS CHRISTI WEBB DUVAL Eagle Ford Shale Prospect Known regional source rock across large petroliferous basin Reservoir quality and geochemical attributes poorly understood The area of the prospect was >10 MM acres with high side Resource Potential of >10 BBOE AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 7

Case Study for Unconventional Exploration: Hawkville Field In early 2008 the CEO of Petrohawk charged the Exploration team to find another Haynesville-like play We targeted the Eagle Ford Shale based on its significance as a regional source rock Q1: Mapped the Eagle Ford across the entire Gulf Coast Basin and identified an anomalously thick, porous and highly resistive Eagle Ford section in La Salle and McMullen Counties Q2: Acquired Eagle Ford cuttings on a key well and had them analyzed for TOC, VRo and other key parameters Q3: Acquired ~160,000 acres and spud the initial test well Q4: Completed it in October 2008 for 7.6 Mmcf/d and 251 Bc/d AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 8

Hawkville Field in Early 2008 Very limited well control in prospective area Prospect was located in a regional setting between two divergent shelf margins which suggested the presence of a mini-basin While the geochemical properties were unknown, the depth range (10,000-11,500 ) suggested a relatively mature source rock AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 9 Slide 9 DE WITT FRIO BEE ZAVALA WILSON KARNES GOLIAD MCMULLEN DIMMIT LA SALLE MAVERICK VICTORIA LIVE OAK ATASCOSA 1454700 1459700 1464700 1469700 1474700 1479700 1484700 1489700 1494700 1499700 1504700 1509700 1514700 1519700 1524700 1529700 1534700 1539700 1544700 1549700 1554700 1559700 1564700 1569700 1574700 1579700 1584700 1589700 1594700 1599700 1604700 1609700 1614700 1619700 1624700 1629700 1634700 1639700 1644700 1649700 1654700 1659700 1664700 1669700 1674700 1679700 1684700 1689700 1694700 1699700 1704700 1709700 1714700 1719700 1724700 1729700 1734700 1739700 1744700 1749700 1754700 1759700 1764700 1769700 1774700 1779700 1784700 1789700 1794700 1799700 1804700 1809700 1814700 1819700 1824700 1829700 1834700 1839700 1844700 1849700 1854700 1859700 1864700 1869700 1874700 1879700 1884700 1889700 1894700 1899700 1904700 1909700 1914700 1919700 1924700 1929700 1934700 1939700 1944700 1949700 1954700 1959700 1964700 1969700 1974700 1979700 1984700 1989700 1994700 1999700 2004700 2009700 2014700 2019700 2024700 2029700 2034700 2039700 2044700 2049700 2054700 2059700 2064700 2069700 2074700 2079700 2084700 2089700 2094700 2099700 2104700 2109700 2114700 2119700 2124700 2129700 2134700 2139700 2144700 2149700 2154700 2159700 2164700 2169700 2174700 2179700 2184700 2189700 2194700 2199700 2204700 2209700 2214700 2219700 2224700 2229700 2234700 2239700 2244700 2249700 2254700 2259700 2264700 2269700 2274700 2279700 2284700 2289700 2294700 2299700 2304700 2309700 2314700 2319700 2324700 2329700 2334700 2339700 2344700 2349700 2354700 2359700 2364700 2369700 2374700 2379700 2384700 2389700 2394700 2399700 2404700 2409700 2414700 2419700 2424700 2429700 2434700 2439700 2444700 2449700 2454700 2459700 2464700 2469700 2474700 2479700 2484700 2489700 2494700 2499700 2504700 2509700 2514700 2519700 2524700 2529700 2534700 2539700 2544700 2549700 2554700 2559700 2564700 2569700 2574700 2579700 2584700 2589700 2594700 2599700 2604700 2609700 2614700 2619700 2624700 2629700 2634700 2639700 2644700 2649700 2654700 2659700 2664700 2669700 2674700 2679700 2684700 2689700 2694700 2699700 2704700 2709700 2714700 2719700 2724700-20000 -15000-10000 -5000 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 105000 110000 115000 120000 125000 130000 135000 140000 145000 150000 155000 160000 165000 170000 175000 180000 185000 190000 195000 200000 205000 210000 215000 220000 225000 230000 235000 240000 245000 250000 255000 260000 265000 270000 275000 280000 285000 290000 295000 300000 305000 310000 315000 320000 325000 330000 335000 340000 345000 350000 355000 360000 365000 370000 375000 380000 385000 390000 395000 400000 405000 410000 415000 420000 425000 430000 435000 440000 445000 450000 455000 460000 465000 470000 475000 480000 485000 490000 495000 500000 505000 510000 515000 520000 525000 530000 535000 1454700 1459700 1464700 1469700 1474700 1479700 1484700 1489700 1494700 1499700 1504700 1509700 1514700 1519700 1524700 1529700 1534700 1539700 1544700 1549700 1554700 1559700 1564700 1569700 1574700 1579700 1584700 1589700 1594700 1599700 1604700 1609700 1614700 1619700 1624700 1629700 1634700 1639700 1644700 1649700 1654700 1659700 1664700 1669700 1674700 1679700 1684700 1689700 1694700 1699700 1704700 1709700 1714700 1719700 1724700 1729700 1734700 1739700 1744700 1749700 1754700 1759700 1764700 1769700 1774700 1779700 1784700 1789700 1794700 1799700 1804700 1809700 1814700 1819700 1824700 1829700 1834700 1839700 1844700 1849700 1854700 1859700 1864700 1869700 1874700 1879700 1884700 1889700 1894700 1899700 1904700 1909700 1914700 1919700 1924700 1929700 1934700 1939700 1944700 1949700 1954700 1959700 1964700 1969700 1974700 1979700 1984700 1989700 1994700 1999700 2004700 2009700 2014700 2019700 2024700 2029700 2034700 2039700 2044700 2049700 2054700 2059700 2064700 2069700 2074700 2079700 2084700 2089700 2094700 2099700 2104700 2109700 2114700 2119700 2124700 2129700 2134700 2139700 2144700 2149700 2154700 2159700 2164700 2169700 2174700 2179700 2184700 2189700 2194700 2199700 2204700 2209700 2214700 2219700 2224700 2229700 2234700 2239700 2244700 2249700 2254700 2259700 2264700 2269700 2274700 2279700 2284700 2289700 2294700 2299700 2304700 2309700 2314700 2319700 2324700 2329700 2334700 2339700 2344700 2349700 2354700 2359700 2364700 2369700 2374700 2379700 2384700 2389700 2394700 2399700 2404700 2409700 2414700 2419700 2424700 2429700 2434700 2439700 2444700 2449700 2454700 2459700 2464700 2469700 2474700 2479700 2484700 2489700 2494700 2499700 2504700 2509700 2514700 2519700 2524700 2529700 2534700 2539700 2544700 2549700 2554700 2559700 2564700 2569700 2574700 2579700 2584700 2589700 2594700 2599700 2604700 2609700 2614700 2619700 2624700 2629700 2634700 2639700 2644700 2649700 2654700 2659700 2664700 2669700 2674700 2679700 2684700 2689700 2694700 2699700 2704700 2709700 2714700 2719700 2724700 X/Y: Feet -20000-15000 -10000-5000 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 105000 110000 115000 120000 125000 130000 135000 140000 145000 150000 155000 160000 165000 170000 175000 180000 185000 190000 195000 200000 205000 210000 215000 220000 225000 230000 235000 240000 245000 250000 255000 260000 265000 270000 275000 280000 285000 290000 295000 300000 305000 310000 315000 320000 325000 330000 335000 340000 345000 350000 355000 360000 365000 370000 375000 380000 385000 390000 395000 400000 405000 410000 415000 420000 425000 430000 435000 440000 445000 450000 455000 460000 465000 470000 475000 480000 485000 490000 495000 500000 505000 510000 515000 520000 525000 530000 535000 Swift Pielop #1 Phillips LaSalle #1 Sligo Shelf Margin Edwards Shelf Margin

Key Finding #1: World Class Petrophysical Characteristics Atascosa_bee_dewitt_gonzales_liveoak_lasalle_maverick_webb_wilson Swift Pielop 1 Primarily oil Significant portions derisked GR Resistivity AT90 Early entry, 0low avg. 100 cost Eagle Ford Scalable Shale Longer-term leases Low near-term capital requirements Log PHIDEDIT Density Log Depth(ft) 0 120 0.3 0 Depth(ft) 10900 10900 10920 10920 10940 10940 10960 10960 10980 10980 11000 11000 11000 11020 11020 11040 11040 11060 11060 11080 11080 11100 11100 11100 11120 11120 11140 11140 11160 11160 11180 11180 11200 11200 11200 11220 11220 11240 11240 11260 11260 11280 11280 11300 Buda 11300 11300 Swift Pielop #1 Top Eagle Ford Base Eagle Ford AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 10

Key Finding #2: Positive Geochemical Characteristics Phillips LaSalle #1 D&A in 1952 Eagle Ford Shale Gas Risk Assessment Diagram AC TOC (0-5) EFS Tr (50 100) Ro (0.2 2.2) BUDA Minimum Threshold Phillips LaSalle #1 Tmax (435-470) Dryness (0 100) AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 11

Key Finding #3: Seismic Definition of the Reservoir SP: MT 3D CookWest MIG TVF, 401, 1130 MT GT LR-37, 160.74 MT 3D LAKEWOOD - BURKS MT RANCH, GT 77-16, 1482, 378.02 125 - MT GT 65-253 616 MIG TVF - 4800.0 4820.0 4840.0 4860.0 4880.0 4900.0 MT GT 927 MIG TVF, 1368.54 4920.0 4940.0 4960.0 498 The anomalously thick Eagle 1.600 Ford at Hawkville could be identified 1.700 with 2D seismic data 1.500 Dora Martin 2H Dora Martin 4H Dora Martin 1H Dora Martin PH 1 Isochron Thick in Center of Hawkville Field 1.800 1.900 EFS Res EFS Res EFRT EFS Res 2.000 Buda 2.100 A grid of 2D data was acquired that allowed the mapping of the 2.200 entire extent of the thick Eagle 2.300 Ford reservoir Eagle Ford Shale 2.400 2.500 Data Courtesy of Seitel, Inc. AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 12

Hawkville Field in Late 2008 Petrohawk Energy STS #1H Spud Date:08/2008 1 st Prod: 10/2008 Petrohawk Energy Dora Martin #1H Spud Date:09/2008 1 st Prod: 01/2009 Fall 2008 Petrohawk Acreage Position ~160,000 net acres AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 13

The Eagle Ford Shale in 2012 Eagle Ford Shale Competitor Map AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 14

Night View of Texas by Satellite AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 15

Unconventional Appraisal Process AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 16

Critical Data for Effective Appraisal Program: Core Data and Core to Log Data There is nothing more critical to the evaluation of a shale resource than the extensive data gathered from whole core analysis: Measurement of conventional reservoir attributes such as Porosity, Sw, Permeability, etc. Identify and measure the mineralogy, specifically clay minerals versus coarse grained constituents Measurement of key geochemical (TOC, Thermal Maturity, etc.) and geomechanical attributes (Young s Modulus and Poisson s Ratio) Most importantly, calibrate core measurements to conventional open hole log suites, therefore expanding knowledge regarding reservoir characterization, formation evaluation (OGIP, Recovery and EUR) and optimization of the hydraulic fracture stimulation AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 17

Pilot Wells During Appraisal Process Essential to acquire acceptable grid of open hole data subsequent to discovery Percentage of wells with pilot holes with complete data suite (core plus full complement of open hole logs) is low, but it is critical to have adequate baseline of core data Collective data set will enhance: o o Reservoir characterization Identify optimum stratigraphic target for lateral o Help determine the optimum stimulation recipe (fluid compatibility, geomechanics, stress regime, fracture density, etc.) o Provide basis for creating algorithms that translate core data to log data AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 18

Analytical Process from Core Complete Cored Interval o Spectral Core Gamma o Fracture & Sedimentological Description o Core Photography Basic Rock Properties o Porosity characterization (GRI method) o Steady-state nano-permeability (CT-Scan plugs) Reservoir Geology & Geochemistry o Geochemistry (TOC, Pyrolysis, Vitrinite Reflectance) o Thin Section Petrography & FIB SEM o X-Ray Diffraction AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 19

Analytical Process from Core (continued) Adsorption & Desorption o Desorbed gas content & composition o Adsorption isotherm o Isotope Analysis Completion & Stimulation o Geomechanical Properties (Single-State & Multi-Stage) o Proppant Embedment and Fracture Conductivity o Capillary Suction (CST) and Roller-Oven Testing AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 20

Basic Petrophysical Workflow Core Data Xplots lnterpreted LOG CURVES cluster analysis TOC Porosity Permeability Saturation Lithology Geomechanics ALGORITHMS facies classification AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 21

Max Perm Ø-Total TOC Core to Log Calibration: TOC-Porosity- Permeability-Saturation TOC Fair correlation coefficient r 2 ~ 0.65 Triple Combo 1 2 3 4 5 6 RHOB Hydrocarbon-filled Porosity Highest correlation coefficient r 2 ~ 0.93 Ø-HC Total porosity HC-filled porosity 4 Sw based on default Rw ~ 0.025 Permeability Least dependable of the algorithms (use qualitatively and in localized zones) Ø-HC AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 22

Core to Log Calibration: Lithology Dolomite 1.1% Pyrite 3.1% Plagioclase 3.2% Calcite 60.9% Quartz 15.4% Clay 15.2% * Key Element to Mineral Conversions QFM ~ 2.139 * Si Calcite ~ 2.497 Ca Calcite + Dolomite ~ -7.5 + 2.69 (Ca + 1.455 Mg) Pyrite = 1.8709 S Kerogen ~ 0.83 /TOC Clay ~ (1- sum of above) Carbonate (chalk) (Source : Herron and Herron, 1998) element data from ECS-type logs composite lithofacies display 7 8 9 element to mineral conversion * 1 0 1 1 1 2 PEF check 1 3 marl calcareous mudstone clay-rich mudstone argillaceous mudstone siliceous mudstone AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 23

Static YM Core to Log Calibration: Geomechanics 1 4 1 5 1 6 Use as a proxy for estimating Vs DTS when dipole or sonic scanner data is unavailable r 2 ~ 0.94 Track 14 Softer Young s Modulus Static ~ 0.65 * Dynamic R2 ~ 59% 1. Use industry standard algorithms to calculate dynamic elastic modulii (Vp, Vs, RhoB) Lambda Mu Bulk Modulus P-wave Modulus Poisson s Ratio Young s Modulus Harder Uniaxial Compressive Strength (UCS *) from DTC or Vp Dynamic YM 2. Convert from dynamic to static modulii for fracture propagation modeling Dynamic-static relationships are derived from multi-stage Triaxial testing where both static and dynamic measurements are collected simultaneously Softer AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 24

Core to Log: QC and Interpretation 1 2 3 4 5 6 7 8 9 GR-TOC RES PORO-PERM SATURATION 1 0 LITHOLOGY 1 1 1 2 1 3 1 4 1 5 FRACTURE PROPAGATION 1 6 Top Shale Base Shale TOC distribution Sweetspot screening Rock properties from ECS-type tool should dovetail with geomechanical descriptions Frac properties from DTC-DTS AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 25

YOUNG S MODULUS Facies Extraction Using Geomechanical Data F Facies extracted from Crossplot B E A-1 A-2 C D A-3 A-4 Cluster Analysis Poisson s Ratio vs. Young s Modulus Lambda*Rho vs. Mu*Rho (or any other attribute combination) POISSON S RATIO AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 26

The Whole Core Itself: Macro Observations From the Eagle Ford Marl Foraminifer Marl Foram-Rich Marl Limestone Calcareous Shale Ash Beds/Bentonite Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 27

The Relationship of Eagle Ford Core to Gamma Ray Showing Significant Vertical Heterogeneity GR 0 200 COREGR_ 0 api 200 K 72 SB DEPTH FT Courtesy of Core Laboratories K 69 SB 12750 K 65 MFS 12800 12850 K 64 SB 12900 BUDA K63 SB Buda 12950 AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 28

Mineralogical Analysis: Relationship of Texture and Composition to Shale Reservoir Quality Epi-fluorescence Petrography o Lithology o Rock Type o Mineralogy o Micro Fractures Silica-Filled Algal Cyst X-ray Diffraction Analysis o Mineralogy o V Clay SEM Analysis 0.1 mm Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 29

Micro Textural Relationships: The Importance of Scale to Proper Reservoir Identification 0.5 mm Standard 30 micron thick slide: No apparent grain support which would suggest poor reservoir quality Ultra Thin (20 micron) slide: Significant grain support which leads to better reservoir quality Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 30

Depth, feet The Importance of Coarse Grained Constituents : Haynesville Shale MINERALOGY by XRD (Elm Grove Plantation #63 Well) 10387.0 10475.0 10643.0 10843.0 10925.0 11029.5 11047.5 11065.0 11086.5 11107.0 11131.5 11154.5 11176.5 11189.5 Bossier Haynesville 0 20 40 60 80 100 Volume Percent Qtz Ksp Plg Cal Dol Pyr I/S I/M Chl Ker Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 31

The Importance of Coarse Grained Constituents : Marcellus Shale Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 32

Depth, feet The Importance of Coarse Grained Constituents : Eagle Ford Shale MINERALOGY by XRD (PC-Q #1H) 11334.0 11350.5 11366.5 11382.5 11398.0 11414.0 11430.0 11446.0 11462.0 11478.5 11495.0 11510.5 11526.0 11542.0 11558.0 11574.0 11590.0 11606.0 11623.0 Austin Chalk Eagle Ford Buda 0 20 40 60 80 100 Volume Percent Qtz Plg Cal Dol Pyr Mar I/S I/M Chl Kao Ker Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 33

Eagle Ford: Mineralogical Variation Across the Trend Maverick Basin Area Hawkville Area San Marcos Area East Texas Area Clay content increases from west to east Kerogen content remains relatively constant Increase in clay resultant from clastic influence of the East Texas Basin QTZ % CARBONATE % 20% 40% 60% CLAY % 80% XRD Data from Core Lab KEROGEN % 100% AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 34

Effective Gas Permeability, md The Relationship of Porosity and Permeability to Mineralogy: Can t Have One Without the Other 1.00E-01 1.00E-02 1.00E-03 1.00E-04 1.00E-05 1.00E-06 1.00E-07 1.00E-08 1.00E-09 1.00E-10 1.00E-11 1.00E-12 1.00E-13 1.00E-14 1 md 1 md BASIC ROCK PROPERTIES 3 MMCFGPD V 8 MMCFGPD H 250 MCFGPD V 1.5 MMCFGPD V 0 2 4 6 8 10 12 14 Gas-Filled Porosity, percent Raam Unit #3 (Barnett) (Haynesville) Mr Bill 1-30 (Caney) Mr Bill 1-30 (Woodford) Barnett (Avg) Haynesville (Avg) Caney (Avg) Woodford (Avg) 16 MMCFGPD H Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 35

Dry Gas Wet-Gas Oil Window Source Rock Reservoirs: Observed Maturity Effects Burial Depth Maturity (Ro) Oil Gravity (API) 0.5 GOR Organo Porosity Water Saturation Pore Pressure Gradient Recovery Factor 0.6 0.7 0.8 0.9 1.0 1.1 Maximum Liquids Recovery Zone? 1.2 1.3 1.4 1.5 1.6 1.7 Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 36

The Importance of Stress Isotropic Tempered Glass Anisotropic Natural Glass Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 37

Measuring Stress: Essential to Understand Geomechanics of the Reservoir Laboratory Measurement ostatic and Dynamic Measurements on Core Samples (Young s Modulus) Log Data ofull-waveform Acoustic Logs (Dipole Sonic) obulk density olithology AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 38

Definition of Fracture Geometry Fracture Width Height Growth Fracture Closure Stress Production Zone Embedment Zone Courtesy of Core Laboratories AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 39

Unconventional Development Process AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 40

3D Seismic Data: Critical to a Successful Development Program The cost of 3D seismic data is minimal in the total field development cost 3D seismic data is critical in identifying faults and dip changes that could compromise the stratigraphic targeting of a horizontal wellbore Merged ~650 square miles of acquired proprietary data and licensed data in Hawkville Field AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 41

Geo-Steering: An Important New Geoscience Skill Set Horizontal drilling creates significant geological challenges Unforeseen dip changes and/or faults can cause a well to be out of zone for a large portion of a lateral The combination of utilizing 3D seismic data and Measured Depth (MD) to True Vertical Depth (TVD) Gamma Ray correlation allows the geologist to direct the drilling operation to allow the well to stay within the target window The post-drill geologic interpretation of the wellbore also provides insight into the completion design and can cause the completion engineer to vary certain stages of the hydraulic fracture stimulation depending on the inferred reservoir quality within each stage AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 42

Pre-Drill Well Plan Prior to 3D Seismic Data Acquisition 11,000 Well plan is designed using subsurface mapping from well control and regional 2D seismic data Degree of confidence in the interpretation is fairly low Target Line: 11578 TVD @ Zero Vertical Section Assuming Average 2 degree dip AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 43

Pre-Seismic Geosteering Interpretation at TD Pilot Hole Gamma Ray Vertical Section Montage Horizontal Hole TVD Gamma Ray Horizontal Hole MD Gamma Ray AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 44

3D Seismic Acquired After Completion Faulting AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 45

Geosteering Interpretation Using 3D Seismic Data Faults were conduit for frac hit by pressure and fluid transmission from offset well completion AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 46

Stage by Stage Fracture Stimulation Montage Lost lateral section from frac hit from offset well AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 47

Microseismic Data: Down Hole View of Fracture Geometry Monitor Well Fault plane conduit for frac hit induced by offset well Lost Lateral Section Down hole geophones AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 48

Conclusions The geologic aspects of the Exploration process in shale reservoirs requires an inverted thought process as compared to conventional exploration and usually is done with insufficient knowledge of reservoir quality The geologic aspects of the Appraisal process in shale reservoirs is highly dependent on an understanding of the nano elements of the reservoir and requires a tremendous amount of data gathering and analysis over an extremely large area The geologic aspects of the Development process in shale reservoirs has generated a new set of skills, the most prominent being geo-steering, that is exciting, challenging and cross functional with several engineering disciplines AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 49

Acknowledgments BHP Billiton Petroleum colleagues, specifically Vanon Sun Chee Fore, Terry Gebhardt, John Goss, Alan Frink, Andy Pepper, Melissa Florian and Kelley O Brien Core Laboratories, specifically Randy Miller Seitel, Inc. AAPG Distinguished Lecture Tour.DStoneburner.11.1.12 Slide 50