Frack Flowback Water Opportunity Across the Eagle Ford Shale Alex Gupta, James Lamb, Zhengwang He Advised by Dr. Fred Beach and Professor John Butler The University of Texas at Austin May 1, 2015

Introduction: Meet Team UT-Austin! Alex Gupta, MBA Candidate B.S. Mechanical Engineering 7 years of natural gas pipeline experience Zhengwang He, PhD Candidate B.S. Chemical Engineering Specialize in Membrane Water Filtration James Lamb, MBA Candidate B.S. Biomedical Engineering 5 years of oil & gas field service experience

Presentation Itinerary 1.Project Focus 2.Technologies Selected for Solution 3.Business Plan and Implementation 4.Financial Viability

Eagle Ford Region Under High Water Stress Freyman, Monika (2014) “Hydraulic fracturing & water stress: Water demand by numbers” A Ceres report.

Eagle Ford Flowback Water Chemistry Oil and Grease, ~200 ppm Total Dissolved Solids (TDS), ~60,000 ppm Chemical Additives Naturally Occurring Inorganic and Organic Compounds Particulates

Two-Stage Flowback Water Treatment System 1.Oil Skimmer removes up to 200 gallons/day 2.Membrane-based Filtration System – Meets reuse quality – Mobile & small footprint – 10,000 barrels/day capacity (315,000 gallons/day) Omni Water Solutions Abanaki

Treatment System Operations King, George E (2015) “Fracturing flowback: Control analysis & benefits.” 15 to 20 Day Operation

Operational Highlights (Per Well Pad) Processes 6.3 million gallons (67%) of flowback water Generates 5.4 million gallons of reusable water (i.e. enough to frack 1 well) Eliminates 2,330 standard truckloads Recovers 95 barrels of oil

Solution: Turnkey Field Services Company Provide all water handling services during high initial flowback – Purification – Storage – Transportation – Reuse – Disposal Leverage multiple existing equipment vendors to package latest technology for client-specific needs 2 Revenue Streams: – Flowback Filtration Processing – Crude Oil Recovery Offers lower water handling costs to operators than traditional methods

Traditional Well Pad Layout EPA, Study of the potential impacts of hydraulic fracturing on drinking water resources. EPA 601/R-12/011, December 2012

Well Pad Layout With Proposed Solution EPA, Study of the potential impacts of hydraulic fracturing on drinking water resources. EPA 601/R-12/011, December 2012 Omni Water Solutions Wellhead Water Buffer Oil Skimmer Membrane Filtration Frac Tank

Competitive Advantage A turnkey service company is better positioned for long-term success compared to existing market players

Environmental and Regulatory Considerations Business solution offers proactive response to fracking concerns and bans across the US Texas legislation is moving toward mandatory flowback reuse policies due to continued state water shortages Solution reduces resource loading on state permitting entities (TCEQ, RRC, GCD, TDLR)

Cost Breakdown Costs at current market price Charge 20% less than market price for services that are being provided – Complete disposal – Fresh water sourcing, treatment, and one half of transport costs Operating margin of 42.8% to 63.5% Water savings of $9,300 to $31,000 per well

Cost Scenarios High degree of uncertainty Adjust costs as a function of oil price Costs increase proportionally to oil price Simulate different scenarios

Market Sizing Total market size proportional to oil price 1% initial market share 27% market growth Initial market size and market share growth independent of oil price market share ceiling of 10% Nicot and Scanlon, 2012 Sharr, April, 2014

Simulation Initial Market Share Market Share Growth

Results Mean NPV = $35,017,040 Range of $119,548 to $61,575,785 Mean IRR = 41.66% Range of 4.93% to 82.38%

Funding Options Recommended Sources – Angel Investors – Venture Capital – Commercial Bank Loans Compared to projects with similar IRR: – Lower risk – Longer payback

Summary Service company model in Eagle Ford Noncommittal technology Fast, flexible, mobile, scalable Robust and profitable business

Questions?

Appendix

Hydraulic Fracturing “Fracking” Overview Picture adapted from EPA Water Intensive Process

Fracking Water Cycle EPA, Study of the potential impacts of hydraulic fracturing on drinking water resources. EPA 601/R-12/011, December 2012