Annual Performance Presentation McKay River Thermal Project February 14, 2012
Outline Introductions 3.1.1 Subsurface Overview Related to Resource Evaluation and Recovery 3.1.2 Surface Operations, Compliance, and Issues Not Related to Resource Evaluation and Recovery 2
Subsurface Summary Table of Contents 1. Project Background 2. Geology/Geoscience 3. Drilling and Completions 4. Artificial Lift 5. Instrumentation in Wells 6. 4D Seismic 7. Scheme Performance 8. Future Plans 3
PROJECT BACKGROUND 4
Project Background 2007-211 km high resolution 2D seismic. STP-McKay: Full Bitumen Exploitation Plan Between 2008 and 2011-90 delineation wells were drilled in the project area. May 2009 joint AENV and ERCB application to construct STP McKay Thermal Project (Phase 1). November 2010 - STP received project approval: EPEA Approval No. 255245-00-00 Oil Sands Conservation Act Approval No. 11461. Phase 1, currently under construction, is a Steam Assisted Gravity Drainage (SAGD) project. Conduction and cyclic steam The Project is expected to commence steam injection in Q2 2012. The Project consists of a central processing facility (CPF), well pads, borrow pits, water source wells, observation wells, a water treatment plant, a wastewater treatment plant, access roads and construction and operations camps. SAGD injector SAGD producer Infill horizontal well 1 The facility is approved to produce 1,908m 3 /d (12,000 bpd) of bitumen. 5
Project Background The Project is located approximately 45 km northwest of Fort McMurray and 45 km southwest of the community of Fort MacKay in Section 7-91-14W4M Project Area is 10.5 sections in Township 91, Range 14, W4M and Township 91, Range 15, W4M. Development Area is 1.25 Sections in Township 91, Range 14, W4M. 6
Project Background The initial approved development includes 3 well pads (101-103). The initial development is west of the MacKay River. Well Pad 104 has been applied for under Directive 78 and is currently under review by the ERCB. 7
GEOLOGY/GEOSCIENCE 8
Geology Overview Regional Geology McMurray STP McKay (T91-14w4) McMurray Net Pay Source: Mike Ranger s Regional Study, 2011 9
McKay OBIP by Volumetrics Approval Area OBIP 88,820 E 3 m 3 Approval Area Reservoir Properties: Porosity: 30-33%, Oil Saturation: 65-75%, Height: 10-27m Initial Operating Area (Pads 101,102) OBIP 6,131 E 3 m 3 Operating Pads Average Reservoir Properties: Porosity: 32%, Oil Saturation: 74%, Height: 17-27m 10
Isopach Map of Net Bitumen Pay with 2D Seismic lines Pay calculated: GR < 75 api Density >27% porosity Resistivity >20 ohm*m Shale Interbeds < 1m T. 91 R. 15 R. 14W4 11
Volumetric Polygons on McMurray Net Bitumen Pay Map Project Area 12
Structure Map on the Top of Bitumen Pay R. 15 R. 14W4 T. 91 13
Structure Map on the Base of Bitumen Pay R. 15 R. 14W4 T. 91 14
STP-McKay Core Data within Project Area 90 delineation wells within the project area T. 91 76 wells cored within the project area, all received routine core analysis 37 wells drilled and cored in the project area during 2011 R. 15 R. 14W4 15
Type Well: AA/04-17-91-14w4 Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm Unassociated Upper McMurray gas McMurray Reservoir (Top) McMurray Reservoir Pay calculated: GR < 75 api Density >27% porosity Resistivity >20 ohm*m Shale Interbeds < 1m Lean Zone with 54% oil saturation Devonian Carbonate 16
Petrographical Analysis: AA/04-17-91-14w4 Upper Reservoir (Bioturbated) Very Fine to Fine grained (<180 um) Moderately sorted, Subangular with elongate grains Framework consists of quartz, common chert, siltstones with some feldspars Clays are within the microporosity of the chert or are grains that were transported as a clast, but also exist within the pore spaces. Pore space has 10% clay in the pore space. XRD: Analysis shows 86% qtz, 4% K-feldspar, 2% Plagioclase, 1% dolomite, 1% pyrite and 6% total clay. X X X X X Clay X = Thin Section Samples Main Reservoir Fine to Medium grained (180-250 um) Moderately sorted, Subrounded with elongate and spherical grains Framework consists of quartz, chert, siltstones with some feldspars Similar clays with less interstitial clay found in the rock matrix. XRD: Analysis shows 93% qtz, 2% K-feldspar, 1% pyrite and 4% total clay. Chert Siltstone (Rx Frag) Quartz 17
West Regional Structure Cross-Section A A East Clearwater Shale Wabiskaw Sand Wabiskaw Shale MCMurray Fm Bioturbated Sand Lower Clean Sand Devonian Unconformity A A 18
3D Seismic Map 19
HEAVE MONITORING AND CAPROCK 20
Surface Monitoring (Heave monuments) STP is going to implement an InSAR ground motion monitoring program using Artificial Corner Reflectors (ACR) STP is planning to install 35 ACRs over Pads 101 and 102 in the first quarter of 2012. 21
Caprock Integrity ERCB approved Maximum Operating Pressure (MOP) of 2450 kpa. STP met all ERCB conditions and information requests and received approval June 2011 Detailed caprock characterization studies were completed by STP and leading industry experts to evaluate sustained, caprock integrity at a MOP of 2450 kpa. Caprock integrity studies focused on: Core and geological log evaluations (Weatherford,Advanced Geotechnology) No fault planes observed on logs or in core. No borehole breakouts/drilling induced fractures observed from 17 HMI logs. Laboratory testing (reservoir & geomechanical) Low permeability caprock. Geomechanical properties derived from lab testing. Mini-frac testing for characterizing in situ stress state Mini-frac tests conducted at 2 wells. Geomechanical simulation (Taurus Reservoir Solutions) 2450kPa operating pressure is conservative. No changes since approval of MOP. 22
Caprock Integrity Mini-Frac Tests Mini-frac tests completed at wells 5-16 and 1-18 by BitCan Geoscience & Engineering. Stress gradient results are consistent and similar to those expected in the Athabasca Oil Sands. Vertical stress gradient is ~21.5 kpa/m. Well 5-16-91-14W4 Date March 2009 Well 1-18-91-14W4 Date April 2011 Depth (m TVD) Lithology Minimum Stress (kpa) Minimum Stress Gradient (kpa/m) Depth (m TVD) Lithology Minimum Stress (kpa) Minimum Stress Gradient (kpa/m) 126 Clearwater Shale 2520 20.0 140 Clearwater Shale 2760 19.7 155 Wabiskaw Shale 2710 17.5 174 McMurray Sandstone 2900 16.7 131 Clearwater Shale No Breakdown 138 Clearwater Shale 2900 21.0 147 Wabiskaw Sandstone 3060 20.8 156 Wabiskaw Shale 3250 20.8 164 Upper McMurray Sandstone 3300 20.1 186 McMurray Sandstone 3060 16.5 23
Caprock Integrity Caprock Fracture Pressure Assessment of minimum fracture pressure (S min ) at the base of the Clearwater Formation using mini-frac test results. S min from both wells 5-16 and 1-18 are consistent. S min fracture pressure at the base of the Clearwater Formation caprock is between ~2860 kpa and ~ 3020 kpa. Well Note: Depth to Smin Fracture Fracture Gradient Caprock Base Pressure (m) (kpa/m) (kpa) 5-16 145 19.7 2857 1-18 144 21.0 3024 Base of Clearwater Formation caprock determined from 1-18 well log. 24
Caprock Integrity Monitoring Clearwater Formation: 6 vertical, nested observation wells measuring pressure and temperature. Wabiskaw Member: 1 horizontal well measuring temperature. Surface heave monitoring program is planned. 4D seismic is planned. Blanket Gas system to monitor bottomhole injection pressures. 25
DRILLING/COMPLETIONS 26
Drilling and Completions Well Layout Phase 1 Drilling Program Approved Development area outlined in blue Drilled to date (black): Pad 101 (6 pairs) Pad 102 (6 pairs) Wabiskaw observation well (lies above 1P1) To be drilled (red): Pad 103 (6 pairs) Pad 104 (6 pairs) 27
Drilling and Completions Pad 101 SAGD Well Design for Injection and Production (Gas Lift) Instrumentation Injector blanket gas Producer Fibre and pressure monitor at heel and toe 28
Drilling and Completions Pad 102 SAGD Well Design for Injection and Production (Gas Lift) Instrumentation Injector blanket gas Producer 8 Thermocouples and pressure monitor at heel and toe 29
Artificial Lift Production wells will be equipped for gas lift 30
INSTRUMENTATION 31
Instrumentation in Wells 2S5 2S4 2P5 2P4 1S4 1S3 1P4 1P3 09/10-18 Wabiskaw observation well lies above the 1 st wellpair on Pad 101 6 Vertical, Nested Observation Wells: Pressure and temperature measurements extending from McMurray to Clearwater Formations Horizontal Observation Well: Wabiskaw Member Temperature measurements Well Temperature Pressure AB/2-18-91-14W4 12 temperature points 6 pressure points AB/4-18-91-14W4 12 temperature points 6 pressure points AB/5-18-91-14W4 12 temperature points 6 pressure points AA/7-18-91-14W4 11 temperature points 5 pressure points AB/10-18-91-14W4 12 temperature points 6 pressure points AA/12-18-91-14W4 12 temperature points 6 pressure points 09/10-18-914-14W4 High Temperature Fibre 32
Instrumentation in Wells Typical Vertical Observation Well Southern Pacific Resource Corp Typical Observation Well Schematic (AB/02-18-91-14W4) Surface casing 177.8 mm OD, 25.3 kg/m, H-40 STC Thermal cement to surface Open Hole - 159 mm 12 thermocouples spaced between the Base of McMurray to Clearwater 6 piezometers spaced between Base of McMurray to Clearwater Instrumentation strapped to outside of casing string Casing Centralizer Production Casing 114.3 mm, 15.6 kg/m, L-80, NSCT set at 206.5 m Cemented to surface with thermal cement Thermocouples Clearwater Shale Top Piezometers Wabiskaw Sand Wabiskaw Shale McMurray Devonian 33
Observation Wells Pressure Gauge and Thermocouple Location Thermocouple Location Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm ~80m to the West 2S5 (~187.5m TVD) 2P5 (~194.2m TVD) McMurray Reservoir Devonian Carbonate ~20m to the East 2S4 (~188.3m TVD) 2P4 (~195.5m TVD) 34
Observation Wells Pressure Gauge and Thermocouple Location Thermocouple Location Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm ~77m to the West 2S5 (~186.6m TVD) 2P5 (~192.5m TVD) McMurray Reservoir Devonian Carbonate ~23m to the East 2S4 (~188.6m TVD) 2P4 (~194.8m TVD) 35
Observation Wells Pressure Gauge and Thermocouple Location Thermocouple Location Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm ~80m to the West 2S5 (~185.8m TVD) 2P5 (~191.2m TVD) McMurray Reservoir ~20m to the East 2S4 (~187.8m TVD) 2P4 (~192.3m TVD) Devonian Carbonate 36
Observation Wells Pressure Gauge and Thermocouple Location Thermocouple Location Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm ~40m to the West 1S4 (~186.7m TVD) 1P4 (~193.2m TVD) McMurray Reservoir Devonian Carbonate ~60m to the East 1S3 (~186.5m TVD) 1P3 (~193.5m TVD) 37
Observation Wells Pressure Gauge and Thermocouple Location Thermocouple Location Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm ~93m to the West 1S4 (~183.5m TVD) 1P4 (~189.1m TVD) McMurray Reservoir Devonian Carbonate ~7 m to the East 1S3 (~184.6m TVD) 1P3 (~190.8m TVD) 38
Observation Wells Pressure Gauge and Thermocouple Location Thermocouple Location Clearwater Shale Wabiskaw Sand Wabiskaw Shale McMurray Fm ~70m to the West 1S4 (~183.5m TVD) 1P4 (~188.9m TVD) McMurray Reservoir Devonian Carbonate ~30m to the East 1S3 (~184m TVD) 1P3 (~190m TVD) 39
Drilling and Completions Pad 101 Wabiskaw Observation Well Design High Temp Fibre run in coil string TVD ~156mKB 40
4D Seismic Project is not yet operational. The 3D seismic will the be basis of future 4D seismic work. 41
Scheme Performance Project is not yet operational. Pad Drainage Area, E3 m2 Average Net Pay, m Porosity, fraction Sw, fraction OOIP, E3 m3 Cum Oil, E3 m3 Current Recovery Factor, fraction Ultimate Recovery Factor, fraction 101 542 21.3 0.32 0.26 2,738 0.0 0.00 0.55 102 711 20.1 0.32 0.26 3,394 0.0 0.00 0.55 42
Subsurface Future Plans Pad 101 and 102 start-up. Drilling 6 well pairs from Pad 103 and 6 well pairs from Pad 104. No delineation wells are planned to be drilled in 2012, expect to resume observation and delineation program in 2013. Future 4D seismic program. Continued development plan for Phase 1. 43
Surface Facilities & Environmental Table of Contents 1. Facilities 2. Measurement Accounting & Reporting Plan 3. Water Sources & Uses 4. Water Treatment 5. Environmental Summary 6. Compliance Statement 7. Non-Compliance Events 8. 2011 Regulatory Filings 9. Future Plans 44
Facilities Plot Plan STP-McKay Project 45
Facility Plot Plan - Amendments Borrow Pit Expansion Borrow Pit Reduction Pad 103 Expansion 40k bbl Tank Addition Crystallizer Addition 46
Facilities Plot Plan Central Plant (with modifications highlighted) 47
Facilities Plot Plan Central Plant (with modifications highlighted) 40k bbl Tank Addition Crystallizer Addition Cogens Upsize (from 5.0 to 5.67 MW/unit) 48
Facilities Simplified Volumetric Block Flow Diagram 49
Facilities - Amendments Discussion Cogen Size Increase Difference between design basis (5.0MW/unit) and available turbine sizing (5.67MW/unit) Crystallizer Addition Reduce waste water to disposal & increase recycle rate 40,000 bbl tank addition (pending approval) Increase storage capacity to improve operational flexibility associated with sales oil & diluent trucking operation. Well Pad 103 MSL expansion to accommodate typical STP wellpad plot plan. Borrow pit 2 expansion to accommodate Well Pad 103 construction. Reduction of original MSL to reduce soil storage area Well Pad 104 application filed. SIR s and Approval pending. 50
Measurement/Reporting Measurement, Accounting and Reporting Plan (MARP) MARP Approval received Mar 21, 2011. Well production to be estimated utilizing test separators with flow measurement, oil-water analyzers, and manual sampling as required. Each operating, SAGD production well will be tested three times monthly for a minimum duration of 12hrs and pro-rated for time on-line. Updated MARP to be submitted in February 2012. 51
Water Sources & Uses Fresh Water Uses - Make-up water for the project to be drawn from the McKay Channel Empress Formation. Details on water license approval are as follows: 16-8-91-14-W4M: 8-8-91-14-W4M: Daily Max Diversion: 1223 m³/day 853 m³/day 2073 m³/day Annual Max Diversion : 419,750 m³ An application is currently being prepared to: Add third water well 15-8-91-14-W4M to license to serve as a backup well. Increase the licensed rate for well 16-8-91-14-W4M based on performance test data. No increase to daily or annual maximum rates required. 52
Water Treatment Water Treatment Technology Mechanical Vapour Recompression Evaporator technology will be utilized for Produced Water Treatment and production of Boiler Feedwater. Make-up Water will be treated using conventional cation exchange softening. Concentrated by-product of the evaporation process (which contains all the feedwater impurities) is directed to a crystallizer unit for further concentration and additional BFW production. 53
Environmental Summary No reportable spills in 2011 ERCB Commercial Scheme Approval No. 11461C - no compliance issues in 2011. EPEA Approval No. 255245-00-00 (Project) - no compliance issues in 2011. EPEA Approval No. 287052-00-00 (Wastewater System) - no compliance issues in 2011. Water Act Diversion License No. 00262149-00-00 - no compliance issues in 2011. Transport Canada Screening Report Approval No. 7184-70-4-466 (Mackay River Bridge) - no compliance issues in 2011. The Groundwater Monitoring Program was approved by AENV on April 7, 2011 however network construction, monitoring and reporting has yet to be completed. Wildlife Monitoring and Mitigation programs have yet to be approved and implemented. Ambient Air Monitoring Program has yet to be approved and implemented. Fugitive Emissions Leak Detection and Correction Program has yet to be approved and implemented. Soil Monitoring and Management Programs have yet to be approved and implemented. 54
Environmental Summary Corporate Initiatives Active member of the Oil Sands Developers Group (OSDG) Active Member of Canadian Association of Petroleum Producers (CAPP) Becoming a funding member of the Alberta Biodiversity Monitoring Institute Chair of the Highway 63 / AOSTRA Road Traffic Impact Assessment Working Group Active member of the Fort McKay Industry Relations Corporation (IRC) 55
Compliance Statement Southern Pacific Resource Corp. is currently in compliance with all conditions of it s OSCA and EPEA Approvals, the company is also aware of and meeting all of it s regulatory requirements. 56
2011 Regulatory Filings Regulatory Filings in 2011 Submission of the 2011 MARP on February 15 th, 2011; approved by the ERCB on March 21 st, 2011. Submission of the Caprock Geomechanical Modelling Study as required by clause 16 of the ERCB Scheme Approval. Submitted on April 5 th, 2011; approved by the ERCB on June 8 th, 2011. Directive 78, Category 2 Amendment Application to modify equipment power ratings in the CPF and addition of a crystallizer. Submitted on June 7 th, 2011; approved by the ERCB on November 8 th, 2011. Directive 78, Category 2 Amendment Application to add Pad 104 to the ERCB Scheme Approval. Submitted on October 21 st, 2011; SIRs received on December 21 st, 2011 (Responses required by February 20 th, 2012). Directive 78, Category 1 Amendment Application to adjust footprints of Pad 103 and Borrow Pit 3. Submitted on November 23 rd, 2011; approved by the ERCB on December 5 th, 2011. Submission of STP McKay Thermal Project Phase 2 Joint Application and EIA on November 10 th, 2011. 57
Future Plans Planned Wabiskaw Member development.» Anticipate Category 3 Regulatory Filing in 2012» Monitoring of Wabiskaw observation to track conductive heating from McMurray SAGD interval to ensure optimal development of Wabiskaw Member. Phase 1» Start-up SAGD operations on Pads 101 and 102» Continue to look for optimization opportunities in plant Phase 2» Continue to advance Regulatory Process» Continue Engineering Design Development» Continue Stakeholder Engagement 58
QUESTIONS? 59