Grassroots Drilling. A History and Look Ahead. David Wennerstrom. ICOTA Roundtable October 2005 Canadian Chapter

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1 Grassroots Drilling A History and Look Ahead David Wennerstrom ICOTA Roundtable October 2005 Canadian Chapter

2 In the past 10 years CTD rigs have come to dominate much of the shallow gas drilling market in the W.C.S.B. CTD started with early experimentation in the mid 70 s. Further attempts were made in the early 90 s. It became clear that there was great potential for coil tubing conveyed technologies to be able to quickly and competitively drill wellbores in Southern Alberta.

3 The first fit for purpose CTD rigs were built in the late 90 s. Advanced hybrid CTD rig designs being built today have spawned a revolution in primary well drilling. CTD rigs are no longer a fad or a curiosity but have become a primary service and a key technology in the ongoing hunt for energy in North America.

4 Grass Roots Drilling Definition. The drilling of an oil or gas wellbore through undisturbed earth, from a depth of not greater than 150m, either for the purpose of geologic evaluation and/or for the production of oil or gas.

5 CTD Rig Well Types 1) Drilling through a length of pre-set surface conductor pipe requires a pre-setting rig prior to drill out increases coil rig utilization some first generation CTD rigs are not well suited to drill and set surface casing

6 2) Drilling and setting of the surface conductor pipe by the CTD rig second generation CTD rigs are well designed for this operation eliminates a secondary contractor for the client ensures unconsolidated gravels are effectively isolated.

7 Early Attempts 1976 to 1978 Flex Tube experiments with 2 3/8 home made coil to drill 1,200 to 1,700 wells near Brooks to 1996 Full service companies (ie. Dowell, Fracmaster) attempt grass roots drilling projects with limited financial success but get promising results XL Drilling brings big wheel rig from USA, modifies rig to Canadian standards to handle casing joints Serval builds first rig using a conventional injector c/w mast.

8 Commercial Success By 2000 there are 15 first generation CTD rigs in operation Wells all less than 1000m in depth The CTD rigs find steady work with anchor clients (PCP, AEC, Crestar etc.) Many operating companies reluctant to embrace CTD rigs

9 Evolution of the CTD Rig Conventional rigs temporarily modified, cranes used to run casing Big Wheel CTD rigs are modified to CDN standards and jib mast added to run casing. Masted rig using conventional style injector Mast lengths extended to handle range III casing Self propelled mast units used for drilling in Southern Alberta and New Mexico First hybrid trailer style rig with conventional injector c/w top drive for rotary drilling

10 Equipment Evolution Mud motors evolve from 5-6/3 stage with 1 m3/min max. capacity to 5-6/6 stage with 1.35 m3/min capacity Mud motor rubber technology improves with addition of nitrile in stator manufacture Tri-cone drill bits give way to PDC bits with 5 and 6 blade configurations and multiple nozzles Penetration rates routinely top 200m/hour and have exceeded 300m/hour

11 Rig Fleet Growth Year to Date

12 Benefits of Using CTD Rigs Quick mobilization, compact loads Elimination of tool joint connections, faster trips Continuous fluid circulation Ability to snub and strip Statistically safer than convention rigs, no man in derrick or rotary table Straighter holes Reduced environmental impact Rig workers favor working on modern equipment engineered for their safety and convenience

13 Limitations of CTD Rigs String does not rotate Limited jarring ability Coil must be cut to recover if stuck Rigs have more hydraulic and electrical systems resulting in higher maintenance Coil string has fatigue limitations Depth is limited by logistics of transport (weight restrictions)

14 The CTD Rig Fleet Today 13 first generation rigs 38 second generation hybrid rigs Normal drilling depths range from 300m up to 1,500m

15 Why Does it Work So Well? Suitable basin for drilling with many wells in a relatively small geographic area Relatively soft predictable formations Experienced and innovative work force Access to state of art, mud motors, drill bits, coil tubing and other products Economics 101 the operator saves time, drills more wells and makes more money

16 How does the CTD Rig Rank in Industry? 24,500 Forecast YTD YTD

17 % of Market Share estimate

18 Accessibility Over 80% of the wells drilled in 2005 are less than 1800m and accessible to a CTD rig.

19 What s Next? Depth utilization has steadily increased By end of 2005, 73% of CTD rigs will have a depth rating of at least 1500m Approximately 35 CTD rigs with depth rating of 1500m or greater have been ordered for /8 coil tubing is the industry standard, 5 rigs currently using 3 1/2 coil tubing to drill well bores giving the CTD rigs access to larger hole applications Advances in directional drilling tools have spurred DD activity (over 200 wells in 2005, up from less than 70 in 2004)

20 New Technologies Air drilling, CTD rigs ideally suited for application Titanium coil strings, composite coil, chromium tubing Advances in EM technologies are bringing new tools, technologies and techniques Lateral extensions, common in many other countries, may have applications in unconventional gas developments

21 New Markets Strong interest from USA (currently 2 CTD rigs) Several rigs currently ordered are for US market 4,000 to 5,000 wells drilled in US each year accessible to CTD rigs Numerous older fields available for re-drilling Consistent utilization of new technology in US market has been an impediment Overseas markets yet to be fully evaluated

22 Summary CTD has become a main stream service Safety and efficiency of CTD rigs attractive to clients Market concentration on shallow and unconventional gas developments (NGC, shale gas) New technologies and designs needed to increase working depth. Drilling contractors are perfectly positioned to lead the export of CTD to other regions

23 Thank You David Wennerstrom

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