1. SPE 96557 1 High-Pressure Jet Kerf Drilling Shows Significant Potential To Increase ROP 2005 SPE ATCE Dallas, Texas October 9-12, 2005 By John H. Cohen—Maurer Technology Inc. Greg Deskins—Maurer Technology Inc. Dr. John Rogers—U.S. Department of Energy (Morgantown, WV)

2. SPE 96557 2 Drilling Time Study Drilling Consumes Majority of Rig Time Drilling Consumes Majority of Rig Time Increased Depth = Increased Drilling Time Increased Depth = Increased Drilling Time – For all wells, drilling time  33% – For wells >14,000 ft, drilling time  50% To Reduce Costs, ROP Must Increase To Reduce Costs, ROP Must Increase ROP Increase Must be Significant ROP Increase Must be Significant

3. SPE 96557 3 Drilling Time Breakdown Drilling – 49% Reaming – 3%Conditioning Mud – 5% Tripping – 22% Running Casing – 5% Trouble – 4% Test & Log – 7% Wait Time – 3% BOP – 3% Well Depths >14,000 ft From Andersen (1990)

4. SPE 96557 4 Reducing Drilling Costs Drilling is Single Largest Cost Item Drilling is Single Largest Cost Item Increased Drilling Efficiency Best Way to Reduce Costs Increased Drilling Efficiency Best Way to Reduce Costs Rate Increases Must Be Large (2X or Greater) Rate Increases Must Be Large (2X or Greater) Jet-Assisted Drilling Meets These Criteria Jet-Assisted Drilling Meets These Criteria

5. SPE 96557 5 Previous Jet Drilling R&D Exxon (1960s) Exxon (1960s) – Showed that jets alone could remove rock – 15,000 psi at depths up to 12,000 ft Flow Drill (1980s) Flow Drill (1980s) – Ultra HP 30,000-40,000 psi – Concentric drill pipe Shell (1970s) Shell (1970s) Gulf – Erosion Jets (1970s) Gulf – Erosion Jets (1970s)

6. SPE 96557 6 Jet Kerf Drilling High-Pressure Jets Erode Grooves in Rock High-Pressure Jets Erode Grooves in Rock Mechanical Cutters Break Rock Ledges Mechanical Cutters Break Rock Ledges Pressures Range from 5,000–15,000 psi Pressures Range from 5,000–15,000 psi Can Drill Many Formation at High ROPs Can Drill Many Formation at High ROPs Increases ROP 2X to 4X Conventional Rates Increases ROP 2X to 4X Conventional Rates

7. SPE 96557 7 Jet Kerf Drilling

8. SPE 96557 8 High-Pressure Jet Kerf Rates Bit Weight = 2000 lb 10,000 psi 1,000 psi 110 Jet Drilling Rate (ft/hr) 0 200 400 600 800 1000 1200 1400 1600 Texas Cream Limestone Leander Limestone Glacier Bluff Dolomite Pecos Red Sandstone

9. SPE 96557 9 Jet Kerf Drilling Video

10. SPE 96557 10 Original System Concept Coiled Tubing (CT) to Deploy Jet Kerfing BHA Coiled Tubing (CT) to Deploy Jet Kerfing BHA – HP mud motor – Kerfing bit CT Routinely Used with HP Fluids CT Routinely Used with HP Fluids No Tool Joints (Fewer Leak Paths) No Tool Joints (Fewer Leak Paths) Fast Trips Fast Trips

11. SPE 96557 11 CT Reel Injector Head Jet Kerfing Bit HP Pump HP Flow HP Motor High-Strength Coiled Tubing Jet Kerfing with CT Returns

12. SPE 96557 12 Field Test I – Catoosa CT-Deployed System CT-Deployed System Problems Making Up BHA Problems Making Up BHA Problems with CT Ballooning Due to HP Problems with CT Ballooning Due to HP Daily Equipment Cost High Daily Equipment Cost High

13. SPE 96557 13 No Derrick on CT Rig

14. SPE 96557 14 CT Equipment On Site

15. SPE 96557 15 High-Pressure Pumps

16. SPE 96557 16 Catoosa Test Summary Time Lost Making Up BHA Time Lost Making Up BHA High Equipment Costs High Equipment Costs Severe CT Fatigue and Ballooning Problems Severe CT Fatigue and Ballooning Problems Downhole Well Conditions Not Known Downhole Well Conditions Not Known Failed to Test Jet Kerfing Drilling Failed to Test Jet Kerfing Drilling Additional Field Tests Sought Additional Field Tests Sought

17. SPE 96557 17 Field Test II – RMOTC At DOE-operated Rocky Mountain Oilfield Testing Center (Casper, Wyoming) At DOE-operated Rocky Mountain Oilfield Testing Center (Casper, Wyoming) Rotary Drilling Rotary Drilling Option for Deeper Drilling Option for Deeper Drilling Rig Upgrades Required for HP Service Rig Upgrades Required for HP Service Jointed Drill Pipe with Double-Shoulder Tool Joints Jointed Drill Pipe with Double-Shoulder Tool Joints Variety of Formations Drilled Variety of Formations Drilled

18. SPE 96557 18 RMOTC Rig Cooper 550 Rig Rated to 275 kip 7000’ depth Pulls doubles

19. SPE 96557 19 Cost to Upgrade Rig $605,750TOTAL: $500,000New HP Pump $10,000Labor $1,650Welding and X-ray $16,700Gooseneck, unions, hardline, tees, and misc. $5,300Stand Pipe Fill Up Valve 2-1/16" (15,000 psi) $11,800Stand Pipe Master Valve 3-1/16" (15,000 psi) $10,600HP Swivel Joints (Chicksans) $33,500HP 150-ton Drilling Swivel $16,200HP Kelly Hose (10,000 psi) Cost Upgrade for High-Pressure (HP) Service

20. SPE 96557 20 Upgraded HP Swivel

21. SPE 96557 21 High-Pressure Pump

22. SPE 96557 22 Double-Shoulder Tool Joint

23. SPE 96557 23 RMOTC Bit Runs 10.4– Goose EggConv. Bit 2.814.139.3 Goose EggBit 3 – Run 2 2.814.139.8 Red Peaks ShaleBit 3 – Run 2 4.813.866.0 Red Peaks ShaleBit 3 – Run 1 4.713.361.9 Red Peaks ShaleBit 1 – Run 2 6.012.977.7 Red Peaks ShaleBit 2 – Run 2 3.714.855.1 Red Peaks ShaleBit 2 – Run 1 3.713.549.8 Crow Mountain Sand / Alcova Limestone Bit 2 – Run 1 1.3120156 Crow Mountain SandBit 2 – Run 1 ––– (Cleaning out sand from well)Bit 1 – Run 1 Ratio JKD to Conv. Conv. Rate (ft/hr) Jet Kerf ROP (ft/hr) Formation –

24. SPE 96557 24 Jet Kerf Drilling Rates

25. SPE 96557 25 Increase in ROP

26. SPE 96557 26 High-Pressure Kerf Bit (6½”)

27. SPE 96557 27 Rapid Erosion of Nozzles

28. SPE 96557 28 Washout in Side of Bit 3

29. SPE 96557 29 Sectioned Bit Eroded Nozzle Port

30. SPE 96557 30 Solution – Extended Nozzle US Patent No. 6,142,248 High-velocity fluid

31. SPE 96557 31 Summary of RMOTC Tests Drilled Multiple Formations at High ROP (>5X) Drilled Multiple Formations at High ROP (>5X) Used Conventional Rotary Drilling Used Conventional Rotary Drilling No Equipment Problems No Equipment Problems Nozzle Erosion Only Major Issue Nozzle Erosion Only Major Issue

32. SPE 96557 32 Economic Model Conditions & Assumptions Defined Base-Case Well Defined Base-Case Well – 28 total days on site – 24 drilling days – Value based on rig rate of $10,000/day Hole Sizes for Kerf Drilling ≤6½” Hole Sizes for Kerf Drilling ≤6½” 1/3 of Drilling Days for Kerf Drilling 1/3 of Drilling Days for Kerf Drilling

33. SPE 96557 33 13.0 Wells per year $280,000 Cost per well 8 Small hole drilling days (≤6½”) 24 Drilling days per well 28 Total days per well $10,000 Daily rig cost Base-Case Well

34. SPE 96557 34 $220 $227 $240 $232 Well Cost with Jet Kerfing $210 $215 $220 $225 $230 $235 $240 $245 2X ROP2.5X ROP3X ROP4X ROP Drilling Rate Cost per Well ($1000) Daily Rig Rate = $10,000

35. SPE 96557 35 Well Cost including Payback $282 $273 $266 $259 $262 $254 $248 $240 $210 $220 $230 $240 $250 $260 $270 $280 $290 2X ROP2.5X ROP3X ROP4X ROP Drilling Rate Cost Per Well ($1000) 1 Year Payback2 Year Payback

36. SPE 96557 36 Faster ROP = More Wells Per Year Drilling Rate Days Per Well Wells Per Year 28.0 24.0 23.2 22.7 22.0 13.0 15.2 15.7 16.1 16.6 0 5 10 15 20 25 30 Base Case2X ROP2.5X ROP3X ROP4X ROP 0 2 4 6 8 10 12 14 16 18

37. SPE 96557 37 Conclusions Increased ROP is Key Factor in Reducing Total Well Costs. Increased ROP is Key Factor in Reducing Total Well Costs. JKD Can Significantly Increase ROP. In Field Tests, System Drilled 1.3–6X Faster than Conventional. JKD Can Significantly Increase ROP. In Field Tests, System Drilled 1.3–6X Faster than Conventional. JKD Successful in Variety of Formation Types. JKD Successful in Variety of Formation Types.

38. SPE 96557 38 Conclusions (cont’d.) JKD Can Be Accomplished Using off-the- Shelf Equipment to Upgrade Rotary Rigs for HP Operation. HP Kerfing Bits will Require Anti-Erosion Nozzles to Increase Bit Life. Safety Issues for Handling HP Fluids Successfully Addressed on Field Tests. Safety Issues for Handling HP Fluids Successfully Addressed on Field Tests.

39. SPE 96557 39