RC Energy Inc.

Who are we?• Private Alberta corporation, created in

2005

• Business model is to use Waterless Drilling

Technology (WDT) to grow our reserve

base as an Exploration & Production(E&P)

company

• RC Energy Montana Ltd.( USA) is a

subsidiary

• Jim Livingstone owns 95% of Innovation

Energy Inc. created to develop Maritime

Gas

Who are we ?

• Jim Livingstone – President & CE0

• Owns 100% of the outstanding shares

• No debt

• Located in Calgary, Alberta

• Banking – Bank of Montreal

• Legal – Bennett Jones LLP

What we do

• Use our technology to reduce formation damage,

improve well cementing and long reach drilling

• Source gas, CBM and oil opportunities where WD

can solve damage problems and avoid or improve

fracking operations

• Can evaluate large acreage positions quickly and

economically for reservoir potential and

commercial viability

What We Do

• Stimulate more of the reservoir with a vertical,

deviated or horizontal well to access natural

fractures with less drilling damage

• Obtain better samples from exact locations

• Stop and flow test zones as we drill them

• Eliminate fines migration

• Provide superior hole cleaning

• Reverse Circulation Center Discharge

(RCCD)

• Reverse Circulating Cementing (RCC)

• Extended Reach Drilling (ERD)

Waterless Drilling Technology

(WDT)

• 51 wells drilled to date

• Depths from 100 m to 1000 m

• Low pressure and low perm rock

• Water sensitive- clay swelling formations

• Difficult to stimulate formations due to

nearby water zone

• Formations with clay or coal fine migration

problems

Waterless Drilling Technology

Why Waterless Drilling

• Reduces drilling and completion damage

• Drilling fluid and cuttings returned through

center tube

• Better quality of formation samples

• Superior hole cleaning

• Longer bit life

• Less environmental impact

Why Waterless Drilling

• Less drilling damage can reduce the need for

hydraulic fracturing by accessing natural fractures

• Save cost of perforating, cementing, and fracturing

production zones damaged from drilling

• Avoids loss circulation problems

• Low probability of getting stuck with three annuli

to circulate through

Damage From Mud Drilling

Actual Air Drilling Damage

Damage From Cementing

Waterless Drilling Flow Path

• Air or nitrogen carried to bit or hammer

• Between outer and inner pipe walls

• Drill cuttings, exhausted air or nitrogen

returned to surface through inner pipe

Dual-Wall Drill Pipe Flow Path

Dual-Wall Drill Pipe

Inner Pipe

Outer Pipe

Downhole Blow-Out Preventer

(BOP)

Results of Vertical Waterless Drilling

2001-2008

• 25 shallow gas wells

• All flowed gas to surface

• Two wells drilled through coal seam - flared

coalbed methane immediately

• Milk River, Boyer and Bow Island

formations drilled

Bow Island III Flaring

Bow Island IV Flaring

Milk River Formation

Blue Sky Formation

Waterless Drilling Southern

Alberta 2006

Waterless Drilling Northern

Alberta 2006

Results Since 2009

• Three farm-ins completed

• First one - South Marsh Field in West Texas

• Second one - Borderline Project in northern

Montana

• Third one - Lakeview in central Alberta

• Contract well - Caney shale Oklahoma

• All were fluid sensitive shale or sandstones

Caney Shale

Gas Oklahoma

Dry Air Pac System

Venturi Eductor

• Allows the following operations to be

completed without killing the well

• Run slotted liner, production casing or

tubing

• Nipple down the surface BOP

• Install the wellhead

• Cable tool drilling in the Maritimes had to

kill their clay rich wells with water

Natural Fractures Versus Type of

Drilling

• US – Dept. of Energy , multiwell

experiment site Piceance Basin of Colorado

• Lenticular gas reservoir (same as Stoney

Creek)

• Vertical well intersected 1 fracture

• Deviated hole intersected 52 fractures

• Horizontal hole intersected 37 fractures

A Tough Sell in the Maritimes

Infrastructure in Eastern Canada

for Oil and Gas

• Very little, older equipment, yesterday’s technology

• Mob and demob drilling rig from AB is over a $1

million

• Pressure cementing trucks need to be sourced out of

St. John’s Nfld. or London, Ont.

• Investors are reluctant to invest in projects with poor

infrastructure, makes raising capital difficult

• Excellent drilling crews rotate out of eastern Canada

to AB and around the world

New Infrastructure Needed

• Minimum Disturbance Drilling (MMD) are needed

in certain parts of Quebec and Atlantic Canada to

avoid destroying native vegetation and reduce land

use

• Top Drive and Alternating Current (AC) rigs are

needed for better performance in both gas and

CBM

• AC Coil/Drill Pipe rigs allow the use of coil or drill

pipe to improve penetration rates

Minimal Disturbance Drilling

(MDD)

• Developed in Alberta to lessen impacts

from drilling

• State of the art AC electric drilling control

• Nine rig loads plug into each other for

shallow wells to 1000m

• No hydraulic couplings to leak oil

• Protect native grasses, no need to remove

topsoil

MDD

• Depending on geology, wells can be drilled

with air or water

• Air drilling has dust control system

• Mud drilling uses floc water tanks to store

return fluids

• Land spreading of drilling mud possible

• Use of drilling sumps eliminated

MDD Summary

• Allows a better chance for access to land

where agricultural, ranching or other uses

are in conflict

• Reduces the operation footprint by using air

or floc water as the drilling medium

• When used with Waterless Drilling can

minimize abandonment and reclamation

time and costs

Waterless Drilling-MDD Rig

Waterless Drilling-MDD rig

drilling in Alberta

Waterless Drilling-MDD Texas

Waterless Drilling MDD

completed well

Waterless Drilling MDD drilling

lease one year after abandonment

& reclamation

Why aren’t more operators using

Waterless Drilling?

• Companies frac most formations due to low perm,

believe you can frac past formation damage, so no

need to avoid it

• Fracking has worked well in marine shales in

Texas, Oklahoma, Pennsylvania, BC and AB

• Gas drilling is at historic low levels due to low

gas prices

• The technology is only available on a farm-in

basis and not through a service provider

Waterless Drilling Summary

Excellent applications for the following:

• Low pressure reservoirs like shallow gas

• High perm zones where fluids are pushed in

• CBM to avoid damaging the cleat system

• Reservoirs with swelling clays, fines

migration or water zone problems

• Reservoirs that need to access natural

fractures

Waterless Drilling Summary

Has advantages for all stakeholders:

• Investors like the cost savings from avoiding

fracking, cementing production casing and

perforating. Production on stream much faster

• Operators appreciate a much easier and faster

regulatory process. Better sampling and testing

zones while drilling

• Landowners like less land disturbed and much less

truck traffic

Waterless Drilling Summary

• First Nations get groundwater protected, water

usage issues disappear and fewer impacts on land

• Environmentalist have a lot of their negative

issues about E&P activities addressed by not

fracking

• Government can allow E&P activities in areas

where fracking is banned, creating jobs and

royalties

• Media have a new technology to talk about

“We can’t solve problems by using the same kind of

thinking we used when we created them.”

-Albert Einstein

Contact: RC Energy Inc. 403-225-2898

Waterless Drilling Technology

(WDT)