1. XTO Energy AAPL June 2007 Horizontal Drilling in the Barnett Shale Andrée French Griffin Manager of Geology Fort Worth Basin XTO Energy

2. AAPL June 2007 Play Overview Current activity – number of wells, production, the “feeding frenzy” is on! Geological history of the Fort Worth Basin Horizontal Drilling Why does horizontal drilling work in the Barnett A geologist’s view of “how they do that!” The other tools used to make the play economic Induced Frac technology Seismic Conclusions

3. XTO Energy Largest ‘Shale Gas Field’ in N. America Low Risk GAS-IN-PLACE (GIP) 150 BCF/640 acres  ‘Unconventional’ resource play  Covers 15 counties  6,445 producing wells  Producing 2.2 Bcf/d (66 Bcf/month)  2.66 Tcf of gas produced (Nov 2006)  Huge upside potential - 26 TCF (USGS Estimate)  Large resource – low recovery  82% of current production from Core area  Take away capacity is expanding rapidly Source: IHS current thru Nov 2006 Fort Worth Weatherford Cleburne WISEDENTON PARKERTARRANT HOODJOHNSON HILL 35 wells Ouachita Thrust Front DALLAS TIER 1 SOMERVELL CORE ~ 82% of current production 1790 wells 950 BCF 2067 wells 804 BCF 1005 wells 440 BCF 450 wells 62 BCF 136 wells 20 BCF 9 wells.7 Bcf 4 wells 0.15 Bcf 3.5 Bcf BOSQUE 717 wells 238 BCF ERATH 51 wells 2.4 Bcf TIER 2 Long-Term Downspacing COUNTY Wells Cum. Bcf

4. XTO Energy XTO Energy: At Home in the Barnett Shale  Net acreage: 265,000 gross (~ 214,000 net)  Plan to drill 280 - 300 wells in 2007  Producing wells:  180 vertical  420 horizontal  95% of acreage covered by 3-D seismic by mid '07  Active drilling rigs: 24 rigs  19 in CORE  4-5 in Tier 1  1 in Tier 2  2007 drilling inventory:  1,800 - 2,000 wells  Still acquiring acreage and pursuing acquisitions XTO acreage Fort Worth Weatherford WISEDENTON PARKERTARRANT HOODJOHNSON HILL Ouachita Thrust Front DALLAS SOMERVELL BOSQUE JACK Cleburne CORE 110,000 acres (94,000 net) TIER 1 76,000 acres (61,000 net) TIER 2 79,000 acres (59,000 net)

5. XTO Energy Feeding Frenzy!

6. XTO Energy The Feeding Frenzy is on!

7. XTO Energy AAPL June 2007 Play Overview Current activity – number of wells, production, the “feeding frenzy” is on! Geological history of the Fort Worth Basin Horizontal Drilling Why does horizontal drilling work in the Barnett A geologist’s view of “how they do that!” The other tools used to make the play economic Seismic Induced Frac technology Conclusions

8. XTO Energy Geology Overview It is Mississippian-aged -345 mya Organic-rich shale -contains a bunch of dead critters that when broken down form oil and gas Continuous and thick - covering the entire Fort Worth Basin - average thickness 350’ It is a known hydrocarbon producer It is not the same everywhere!

9. XTO Energy Formation of the Fort Worth Basin Geological History Deep Ocean – 345 MYA Deep Subduction zone forms Land mass approaches from SE, volcanoes Basin Fills Mountains in East Texas!! – 300 MYA

10. XTO Energy Mississippian Deposition – 345 MYA From Ron Blakely Paleogography of North America 2005 http://jan.ucc.nau.edu/~rcb7/nam.html

11. XTO Energy Early Mississippian – FW Basin Deep basin From Ron Blakely Paleogography of North America 2005

12. XTO Energy Subduction Zone Northwest Texas is under water! Southeast The Gulf is not the same!

13. XTO Energy Late Mississippian 325 MYA From Ron Blakely Paleogography of North America 2005

14. XTO Energy Early Pennsylvanian - 315 From Ron Blakely Paleogography of North America 2005

15. XTO Energy Late Pennsylvanian – 300 MY From Ron Blakely Paleogography of North America 2005

16. XTO Energy AAPL June 2007 Play Overview Geological history of the Fort Worth Basin Horizontal Drilling Why does horizontal drilling work in the Barnett A geologists view of “how they do that!” The other tools used to make the play economic Seismic Induced Frac technology Conclusions

17. XTO Energy AAPL June 2007 Horizontal Drill is Effective in the Barnett Geological reasons Exposes the wellbore to more surface area Barnett thickness is about right ~350’ thick Intercepts natural fractures? – Austin Chalk Model Intercepts artificially induced fractures and hopefully reopens natural healed system Avoids karst and faults…not always true. Cultural reasons Allows for drilling under city, lakes, parks, schools... Multiple wells off of one pad – competition with developers is tough!

18. XTO Energy Applications Of Directional Drilling Definition of Directional Drilling: Directional drilling is the science of directing a wellbore along a predetermined trajectory to intersect a designated sub-surface target But How do they do it?

19. XTO Energy It is not new! Long Beach CA., Shoreline Drilling (1930’s) First Openhole Single Shot Survey, Long Beach, CA.

20. XTO Energy Reference Systems and Coordinates How do you know where the wellbore is? Depth Reference Measured Depth True Vertical Depth Inclination Reference Vertical Reference Direction Measurement Azimuth Reference Quadrant Bearings

21. XTO Energy Fixed Angle Build Motor The right BHA is Important Drill string Collars Mud motor – determines build rate Bit

22. XTO Energy Azimuth (Hole Direction) –The azimuth - the direction of the borehole on the horizontal plane, measured as a clockwise angle (0°- 360°) from the North reference. –All magnetic tools give readings referenced to Magnetic North; however, the final calculated coordinates are referenced to either True North or Grid North. Azimuth - Degrees from North to High Side (Horizontal Plane) N S Azimuth W E Reference Systems and Coordinates

23. XTO Energy Directional Control Methods Oriented Mode – Sliding Inclination – magnetic tools in BHA Wellpath – Controlled curvature – Controlled direction – No drill string rotation

24. XTO Energy Directional Control Methods Rotary Mode - Rotating Wellpath – Behavior same as a rotary drilling assembly – Hole slightly over size

25. XTO Energy Intercepts natural fractures Pilot hole Opposing laterals Applications of Directional Drilling

26. XTO Energy Shoreline drilling Applications of Directional Drilling

27. XTO Energy Re-entry/Multi-lateral wells – our future?? Applications of Directional Drilling

28. XTO Energy AAPL June 2007 Horizontal Urban Drilling Multiple wells off of one pad Reduces foot print Reduces influence on neighbors Centralizes facilities Centralizes pipeline access and reduces number of ROW Complications Creates shallow drilling hazards Many landowners do not own minerals

29. XTO Energy Inaccessible locations Applications Of Directional Drilling

30. XTO Energy City Limits and the Core

31. XTO Energy Current Pad – 4 wells

32. XTO Energy Current wells – 3 wells & 1 infill

33. XTO Energy 40 acre infill – 6 wells

34. XTO Energy 20 acre development – 10 wells

35. XTO Energy Let’s Look inside a Horizontal Wellbore AAPL June 2007

36. XTO Energy

37. HEALED FRACTURE OPEN FRACTURE BARNETT SHALE NEWARK EAST FIELD PARKER CO., TX

38. XTO Energy HEALED FRACTURE OPEN FRACTURE BARNETT SHALE NEWARK EAST FIELD PARKER CO., TX

39. XTO Energy

41. Play Overview The tools used to make the play economic Horizontal Drilling Frac technology gets the gas out Seismic identifies geohazards

42. XTO Energy Barnett Shale – New Technology Horizontal Drill & Frac

43. XTO Energy

44. Barnett Wellbore Schematic Stage 4 Stage 5 3 – 5 Stages of fracs starting at “toe” Typical frac: 18,000 BW & 400,000 lbs. sand per stage Stage 3 Stage 2 Stage 1

45. XTO Energy Play Overview The tools used to make the play economic Horizontal Drilling Frac technology gets the gas out Seismic identifies geohazards Faults Karsts

46. XTO Energy THE EXPLOSIVES PRODUCE THE SOUND WAVES, WHICH THEN BOUNCE BACK FROM THE LAYERS

47. XTO Energy It’s not my fault that the rock is broken. It’s a Fault! High & thick! Gone! Low? Low and Thin?!?

48. XTO Energy VR Crossline 106

49. XTO Energy VR Crossline 106

50. XTO Energy 400’ fault

51. XTO Energy Karst, fancy “geo-term” for Sink Hole

52. XTO Energy 1800’

53. XTO Energy Play Summary Industry is still on the learning curve The play is evolving technically and economically Horizontal drilling and improved frac techniques are expanding the play to the south and west XTO leasing strategy based on geology and maturation XTO drilling is based on geology and seismic

54. XTO Energy Conclusions I “The only true wisdom is in knowing you know nothing.” – Socrates... Feeling fairly wise!

55. XTO Energy Conclusion II... “Without the whole group, we know even less.” AFG Businesses/Ranchers/Landowners Commercial/Residential Developers Cities and Municipalities Landmen and Brokers Geologists Engineers Geophysics So many others!

56. XTO Energy The Barnett is complex Frac technology moves the gas Seismic helps steer away from Karsts and Faults Horizontal drilling Allows for better well placement in the section More exposure to rock Avoid culture The play is logistically intensive – a Real Group effort!!

57. XTO Energy AAPL June 2007 Many Thanks to: XTO Energy Mark Pospisil – VP Geology & Geophysics Operational Group − Jacky Brown, Jimmy Hasley & Terry Henderson LEAM Drilling Systems Matt Anding & Dan Fox AAPL – for allowing me to give my two cents worth – or less!

58. XTO Energy Barnett Shale – Original Drill & Frac

59. XTO Energy Frac Technology Lower Barrier or Not? Viola Pinchout Ouachita Overthrust Good bottom seal “Not” – no lower barrier

60. XTO Energy Horizontal vs. Vertical Drilling Core Verticals are good − 1.5 – 2.5 BCF/well Horizontals are better − 2.5 – 6.0 BCF/well Horizontals allow less surface disturbance Non Core Verticals are okay − 500 – 750 MMCF/well Horizontals are significantly better − 1.5 – 3.0 BCF/well Horizontals reduce the risk of breaking into water…Actually old thought, statistical − Multiple stage fracturing Fracture Stimulation Viola Ellenburger Productive Barnett Shale Ellenburger Viola CoreNon-CoreCoreNon-Core