GeoSpectrum Intro Seismic Exploration for Fractured Lower Dakota Alluvial Gas Sands, San Juan Basin, New Mexico U.S. Department of Energy Contract No. DE-AC-00NT40697 Contractor: GeoSpectrum, Inc., Midland, Texas Industry Partner: Burlington Resources, Farmington, New Mexico Principal Investigator: Dr. James J. Reeves, Ph.D., P.G., P.E. Project Manager: W. Hoxie Smith, M.S.

Regional Map of 4 Corners Area After James A. Peterson, et al (1965) Figure 1

MCFG Cumulative Gas Base Map / Dakota Gas Production Figure 2

Greenhorn-Burro Canyon Type Log (After Whitehead, 1993) Figure 3

Prospect Development Methodology Table 1

Bubble size is best 12-months production Hydrocarbon Pore Volume vs. Porosity-Thickness E Figure 5

Number of Dakota Fractures vs. Best 12 Month Production Indicator Number of Dakota Fractures Best 12 Months Production Indicator Figure 6

Seismic Line Sample DKOT MRSN ENSS Figure 7

Lineaments in Seismic Section Coherency 1350 ms Figure 8a

Lineaments in Seismic Section Coherency ms (3D View) Figure 8b

Lineaments in Seismic Section All Azimuth Timeslice 1308 ms Figure 9a

Lineaments in Seismic Section All Azimuth Timeslice 1308 ms (3D View) Figure 9b

Dinosaur Ridge Dakota Photo credit John M. Ghist Dinosaur Ridge Near Morrison, Colorado Figure 10

Lower Dakota Seismic Lineaments with Borehole Breakout Rose Diagrams Figure 11

Lower Dakota Seismic Lineament Density Lineaments Per Grid 900 x 900 ft Grid Fractured Reservoir Leads IH GF E D C B A Lower Dakota Rose Diagrams Figure 12

Lower Dakota Seismic Structure Subsea Depth ft Showing Lower Dakota Rose Diagrams and Seismic Lineaments Figure 14

Multiple Scales of Observation Dakota Production Trend Regional Scale Seismic Lineaments Field Level Scale Borehole Image Data Localized Scale Dakota Production Mapping (after C. F. Head, June 2001) Seismic Lineaments w/ Lower Dakota Rose Diagrams Figure 13

55e (48) 31 (503) 27 (105)48 (107) 28 (1710) 55 (711) 47 (73) 15 (45) 41 (33) 30 (66) Co-located Co-kriged Dakota Fractures Dakota Fractures With Upper Dakota Rose Diagrams SITE 3 SITE 4 SITE 1 SITE 2 Azimuth Dependent Dix Interval Velocity Difference Figure 28

Wellbore Fracture Data vs. Seismic Velocity Data Wellbore Fracture Data vs. Velocity Anisotropy Interval Velocity (az ) ft/sec (SEISMIC or Macro-Scale Measurement) Dakota Fractures (WELLBORE or Micro-Scale Measurement) Figure 29

Thickness ft Lower Dakota Seismic Isopach Figure 16

Lower Dakota Seismic Coherency / Channel StratigraphyCoherency Figure 17

y = x r 2 = r = Seismic Amplitude Lower Dakota Clay Volume Lower Dakota Clay Volume vs. Seismic Amplitude Data (w/ Sg Bubbles) Figure 18

Co-located Co-kriged Clay Volume Percent Clay Near Trace Seismic Amplitude 98% 79% 87% 40% 56% 75% 61% 90% 59% (With Average Water Saturation Bubbles) Figure 19a

Co-located Co-kriged Clay Volume Percent Clay Near Trace Seismic Amplitude Showing Lower Dakota Rose Diagrams and Seismic Lineaments Figure 19b

Lower Dakota Acoustic Impedance AC IMP ft/ms-g/cc Lower Dakota Rose Diagrams Figure 20

Amplitude vs. Angle of Incidence Class 1, 2, & 3 AVO anomalies From Rutherford and Williams (1989) Figure 23

AVO Modeling for Lower Clay Volume Wells #55 60% Sg 3% clay 710 mcfd #28 44% Sg 8% clay 1710 mcfd #31 39% Sg 13% clay 502 mcfd These 3 wells wells have the best production indicators in the study area Figure 22a

AVO Modeling for Higher Clay Volume Wells #47 21% Sg 18% clay 73 mcfd #15 13% Sg 14% clay 45 mcfd #30 10% Sg 17% clay 66 mcfd Figure 22b

y = x r 2 = r = Phase Difference (Degrees) Gas Saturation (%) Lower Dakota Gas Saturation vs. Phase Difference (w/ Clay Volume Bubbles) Figure 24

Figure 25a

Figure 25b

Lower Dakota Seismic Phase Difference Percent Gas Saturation Co-located Co-Kriged Lower Dakota Gas Saturation Shown with Lower Dakota Rose Diagrams Figure 26

AVO Modeling/Gather Well #28 & Site 4 Site #4Well #28 Figure 27

Composite Map Lower Dakota Reservoir Attributes AREAS Gas, low clay, velocity anisotropy Gas, low velocity anisotropy Gas, high clay Gas, high clay, low velocity anisotropy No gas No gas, low velocity anisotropy No gas, high clay LINES Black Lines…lineaments Thick Black Clouds… outline of higher lineament density 4 ATTRIBUTES Clay Content Lineament Density Velocity Anisotropy Phase Difference/Gas Saturation Figure 30

Conclusions / Prospect Drilling Results

Acknowledgements Acknowledgements GeoSpectrum, Inc. would like to thank the following people for their contributions to this study: U.S. Department of Energy for the majority of the funding of this study. The industry operator and their employees and associates who provided data and interpretations which greatly benefited this project. Dr. James J. Reeves, for his conscientious work as Principal Investigator. Mr. W. Hoxie Smith, who diligently served as Project Manager for this study. Mr. W. Roger Smith, who abstracted the Play Geology section of this paper from the operator’s well files. Mr. Don Zimbeck, for his professional seismic data processing. Mr. Jim Oden, who provided his expert seismic interpretation. Mr. Jeff Kane, who’s petrophysical analysis was invaluable. Ms. Sylvia Chamberlain, who was responsible for exploratory data analysis and AVO analysis / modeling. Mark E. Semmelbeck, Ph.D., for his proficient production data analysis. Mr. Mark M. Gygax, for his engineering review of data and results and efforts in putting this slide show together. DOE technical contract managers, who’s timeliness and assistance has been greatly appreciated.

President and Technical Manager James J. Reeves, Ph.D., P.G., P.E. Dr. Reeves has his degrees from the Colorado School of Mines. He is a registered Professional Engineer in the State of Texas. Dr. Reeves' industry experience includes work with Gulf Oil Corporation and Pecten International Company as an Exploration Geophysicist. As an Assistant Professor of Geology at the University of Texas of the Permian Basin, he taught several courses on finite difference and finite element numerical modeling. He also conducted research in seismic data processing and interpretation of seismic data at UTPB, and as an Associate Research Professor for Texas Tech University. Dr. Reeves has served as a Principal Investigator and Project Geophysicist in two Department of Energy studies focusing on the integration of geological, geophysical, and reservoir engineering data to optimize oil and gas production.

Mr. Smith has over 20 years of industry experience, including 9 years with Atlantic Richfield Company (ARCO) and 4-years with Dawson Geophysical Company before co-founding GeoSpectrum Inc. He has managed several large industry reservoir projects and served as the Project Manager for an integrated reservoir characterization study conducted through the U.S. Department of Energy's Oil & Gas Program. Mr. Smith has been the featured speaker at numerous professional society meetings including national meetings of the Society of Exploration Geophysicists, American Association of Petroleum Geologists, and the Society of Petroleum Engineers. He received his B.S. degree in Geology from Colorado State University and his M.S. degree in Geology from the University of Texas of the Permian Basin. Vice President and Project Coordinator W. Hoxie Smith, M.S.