Cost Effective Offset Well Frac-hit Protection Solution 5th ALRDC Seminar for New Artificial Lift Technology August 2, 2017 Presenter: Rob Hari, VP Product Development

Agenda Horizontal well trends Overview frac-hit HEAL Slickline System Artificial lift transition

How a well is drilled impacts slug flow Terrain based slugging Toe-up Large gas bubble forms at toe Gas bubble eventually becomes unstable and releases in violent manner Large, extended gas flow periods Wellbore Undulations Liquid traps compound slugging Liquid traps do not create material pressure drops, rather they exacerbate slugging As wells get longer, impact more pronounced

Horizontal Well Trends (Longer Wells)

Horizontal Well Trends Higher Proppant Intensity More Stages per Frac Source: Rystad, June 2017

Horizontal Well Trends Tighter spacing No longer drilling for land retention, now pad drilling, multi-zone, infill drilling, parent-child pressure issues, and re-fracking Source: Encana Corporation Permian Update, Slide 9, June 20, 2017, http://bit.ly/2uY4qfz Source: Rystad, June 2017

Horizontal Well Trends (Overall) Taken together, longer wells, more intense fracs and downspacing will exacerbate slugging tendencies and frac hit issues Source: Rystad, June 2017

HEAL Slickline System: Offset Well Frac Hit Protection Infill drilling and downspacing causing more frac hits Expensive problem based on avoidance or remediation Some operators remove all downhole completions, including artificial lift systems to install isolation packers Is there a method to set a deep well barrier without a tubing move? Reference: Jacobs, Trent. April 2017. Oil And Gas Producers Find Frac Hits in Shale Wells a Major Challenge, Journal of Petroleum Technology, https://www.spe.org/en/jpt/jpt-article-detail/?art=2819, (accessed July 26, 2017)

Conventional Rod Pump Conventional rod pump installed in the well. POOH with pump and rods.

Conventional Rod Pump, continued POOH with tubing and anchor. Install deep bridge plug for frac protection. Fracture nearby wells.

Conventional Rod Pump, continued Re-install production tubing and anchor. Re-install pump and rods.

HEAL Slickline Rod System HEAL Slickline System installed in the well with pump and rods. POOH with pump and rods. Wireline POOH HEAL Separator Mandrel, and install plug into separator for frac hit protection. Fracture nearby wells. Wireline POOH plug, re-install HEAL Separator Mandrel. Re-install pump and rods.

HEAL ESP System HEAL ESP System installed in the well. POOH HEAL ESP System and stinger of HEAL Safe Disconnect tool.

HEAL ESP System, continued Install bridge plug above remaining HEAL System for frac hit protection. Fracture nearby wells. POOH with bridge plug. Re-install HEAL ESP System and stinger of HEAL Safe Disconnect tool.

HEAL Slickline System Incorporates a retrievable mandrel that when installed provides the proprietary vortex separation Mandrel can be removed through slickline operations and replaced with other optional mandrels Isolation mandrel provides frac hit protection up to 5,000 psi (9,000 psi when fluid filled to 9,000’) Flow through configuration bypass the separator during flowback Casing Slickline Separator OD (in - mm) Weight (lb/ft - kg/m) Maximum OD (in - mm) Profile Sizes Yield Strength (lbs - daN) Burst Rating (psi - MPa) Collapse Rating (psi - MPa) Temp. Rating (°F - °C) Model 4.5" 114.3 mm 9.5 - 15.1 14.14 – 22.47 3.5 88.9 Upper 1.87” XN 83,160 36,960 12,214 84.2 12,435 85.7 374 190  4500SL Lower 1.62” XN 5.5" 139.7 mm 14.0 – 35.3 20.83 - 52.53 4.0 101.6 57,348 25,520 6,160 42.4 6,470 44.6  5500SL

HEAL Slickline System: Offset Well Frac Hit Protection Rod Pump Frac Hit Protection Well is on production with rod pump and HEAL Slickline System Slickline HEAL Separator Mandrel in place Casing is open for separated gas HEAL System protects pump from gas and solids, as well as maximizes production drawdown When an offset well is fractured there is a risk of a frac-hit with the wellbore. Consequences can include severe artificial lift system damage, productivity loss due to wellbore filling with frac sand, and a well control event with excessive pressures at surface Pull pump and rods from well Slickline unit pulls HEAL Separator Mandrel and installs a standard X profile Blanking Plug/Prong in Slickline Separator With a deep barrier in the well, the frac hit risks and consequences are mitigated Post offset well frac, the procedure is reversed and well is placed back on production Formation Fluids (Oil, Water, Gas) Separated Gas Insert Pump Oil / Water Separated Solids HEAL Slickline Separator c/w Separator Mandrel HEAL Slickline Separator c/w Blanking Plug/Prong (horizontal wellbore is isolated from tubing above separator) SRS SRS HEAL Seal HEAL Seal

HEAL Slickline System: NF to Plunger Lift to RP Natural Flow Plunger Lift Rod Pump If required, can transition to rod pump without pulling tubing Retrieve bumper spring, HEAL Separator Mandrel and standing valve Re-install HEAL Separator Mandrel RIH with insert pump and rods into upper nipple profile Casing is open for separated gas HEAL System protects pump from gas and solids, as well as maximizes production drawdown. HEAL Slickline Separator Flow Through configuration installed (HEAL Slickline Separator is bypassed) Extends natural flow period as SRS lifts fluids around bend and delays the onset of liquid loading Casing is closed Reconfigure to plunger lift configuration (install bumper spring, HEAL Separator Mandrel and standing valve) Plunger Lift similar to conventional Bumper spring landed shallower to improve efficiency; enables more cycles per day allows for lower GLR Casing is closed (unless gas assist required) SRS discharges to annulus at HEAL Slickline Separator and maintains continuous flow; liquid builds up in annulus, not in production tubing Formation Fluids (Oil, Water, Gas) Separated Gas Oil / Water Insert Pump Separated Solids Plunger Bumper Spring HEAL Slickline Separator c/w Flow Through Configuration HEAL Slickline Separator c/w Separator Mandrel HEAL Slickline Separator c/w Separator Mandrel Standing Valve SRS SRS SRS HEAL Seal HEAL Seal HEAL Seal

HEAL Slickline System: Gas Lift and Transition to RP Natural Flow Gas Lift Rod Pump HEAL Slickline Separator Flow Through configuration installed (HEAL Slickline Separator is bypassed) Extends natural flow period as SRS lifts fluids around bend and delays the onset of liquid loading Casing is closed Transition to gas lifting without pulling tubing Gas lift same as conventional; injecting gas down production annulus HEAL System SRS increases production drawdown over conventional gas lifting as fluids are efficiently lifted around bend section and slug flow is mitigated If required, can transition to rod pump without pulling tubing Install HEAL Separator Mandrel RIH with insert pump and rods into upper nipple profile Casing is open for separated gas HEAL System protects pump from gas and solids, as well as maximizes production drawdown. Formation Fluids (Oil, Water, Gas) Separated Gas Insert Pump Oil / Water Separated Solids HEAL Slickline Separator c/w Flow Through Configuration HEAL Slickline Separator c/w Flow Through Configuration HEAL Slickline Separator c/w Separator Mandrel SRS HEAL Seal SRS SRS HEAL Seal HEAL Seal

Summary HEAL Slickline System is an economic frac-hit solution. Mitigating Slug flow from the horizontal adds value Solids control Efficiency as separators and pumps like smooth flow Drawdown reliably maximized HEAL Slickline System offers additional value of reduced CAPEX and OPEX: Inter-wellbore communication or frac-hit risk mitigation Extension of natural flow period Simpler and lower cost transition to artificial lift Simpler and lower cost transitions between artificial lift systems

Questions and Discussion ROB HARI 403-473-1937 rhari@healsystems.com