The Niobrara PlayA Geologic Overview

A Presentation to thePublic Session

2011 RMS - AAPGJune 26, 2011

Robert CoskeyRose Exploration, Inc.

The Niobrara SeawayThe World About 90 Million Years Ago

R C Blakey

You are hereAnd seriouslyunder water!

~300 feet

Coccosphere/Coccoliths

1 micron

NiobraraChalk, Marl

& Shale

Niobrara Play – Oil Production

Colorado

Wyoming

Area of NiobraraCarbonateDeposition

(all benches)

Denver Basin – Regional View

Area of Effective Oil Generation

Denver Basin

Basinal Cross-section

Modified from Matuszczak, 1973

BiogenicGasOil

Gas

The Niobrara Play – Stratigraphy

Primary Target

Secondary Target

Organic rich shales

Chalk Reservoir

Chalk Reservoir

Chalk Reservoir

Organic Marl/Shale

Organic Marl/Shale

Oil Movement

This Niobrara systemhas the potential

to generate10~20+ Million Barrels

of Oil / Square Mile

Depending onRichness and

Level of Maturation!!!

Silo Area

The Rock

Niobrara Core

Microscopic ViewNatural Fractures

Hydrocarbon GenerationFractures

Courtesy Rob Sterling

200X

White LightEpi-fluorescence

How ‘Rich’ is the RockOrganic Richness (TOC)

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30TOC (weight %)

Rel

ativ

eFr

eque

ncy

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30TOC (weight %)

Rel

ativ

eFr

eque

ncy

NiobraraTOCs

BakkenTOCs

All Maturities

How Cooked is the RockThermal Maturity

1 20.90.80.70.60.50.40.30.2

(Vitrinite Reflectance (%Ro)

10000

9000

8000

7000

6000

5000

4000

3000

2000

1000

0

-1000

-2000

-3000

-4000

-5000

Drill

ing

Dept

h(ft

) - Tertiary- Fox Hills- Pierre

- Hygiene

- Niobrara- Codell

- Skull Creek

Surface

Vitrinite Reflectance* (%Ro)vs Depth

Amoco 344Asw sw 25-10N-64W

OilWindow

* Vitrinite reflectance is a measureof the thermal maturity of organicmaterial – or how cooked it is…

Thermal Maturity – Mapping

~250Miles

Modified from Matuszczak, 1973

NiobraraMaturity

(calc %Ro)

Smagala,et al, 1984

0.0 0.6 1.0 1.4 2.0Vitrinite Reflectance (%Ro)

immature oil window wet gas dry gas

Silo

Wattenberg

WyomingNebraska

Colorado

Burial History and Oil Generation

Time (Ma) Landon, et al, 2001

Generation Potential210 BO/Ac-ft

150+/- ft shale~20 MMBO/Sq Mile

Depending onOrganic Richness

and Maturity!!

Tertiary

Pierre Sh

Niobrara

Davis Oil 1 Berrynw sw 13-16N-66W

Burial HistoryPlot

Time (Ma)

Dep

th (f

t)

Niobrara

The Early Niobrara Play – Silo

VerticalDrilling

HorizontalDrilling

~1990

St Mary Land 1-19H (2010)IP: 1,075 BOEPDCompl: 5/26/2010Cum: > 100,000 BBL Oil Stone Energy B-3 (1983)

IP: 37 BOPDTotal Prod: 2,370 BOAbandoned

Modified from Sonnenberg and Weimer, 1993

New HorizontalDrilling 2010

Silo FieldDisc: 1981 Hybrid Development Process

‘Niobrara’ Prod ~10 MM BO

The Early Niobrara Play – Structure

Rangely (CO)

Buck Peak (CO)

Silo (WY)

Production is Isolatedto areas of

Structural Deformation

Vincelette & Foster, 1992

Vincelette & Foster, 1992

Well Spacing & Surface Issues

One MileOne Mile

Teapot Dome FieldWyoming – 1920sVertical Drilling

Parshall FieldNorth Dakota – 2006Horizontal Drilling

Surface Location

Bottom Hole Location

The horizontalwellbore is

1.8 Miles Belowthe surface!

40 acres

Multiple Wellbores from 1 Pad

South Belridge Field, CA (1911) Average spacing: One well every 1/2 acre

Evolution of Completion TechnologyWhy is this working?

(Source: EOG Corporate presentation 2010)Hydraulically Induced FracturesHydraulically Induced Fractures

Wellbore & Liner

Staged Hydraulic Fracturing

Packers

1 of Multiple FracksImpervious Pierre Shale> 6000 feet thick

This process reaches 20,000,000times more reservoir than old,vertical technology!

Fracture Stimulation Concerns~7

000-

9000

feet

Main Fresh Water< 500 feet deep

~6000 ft shale above Niobrara blocks vertical propagation of frac

VerticalWell

HorizontalWell

Example Output of a Hydraulic Fracture Model

Why use stage fracks?• Create more fracture surface area• Limit vertical growth !

~ 20

0-40

0 fe

et

~4000 feetNiobrara

DeepProtective

Casing

SurfaceProtective

Casing

8000

feet

dee

p

(1.5

Miles)

4000 feet out

(0.75 Miles)

LittleAmerica

The Niobrara frac heights are 200-400 feet +/-…Approximately the length of the building we are in!

Drilling Scale – Vertical & Lateral

Cheyenne

5,000 feet

France To Ban Fracking

“The French Parliament has voted 287-146 to ban hydraulic fracking…a process that activists say is harmful to the environment.”

France24 International News 05/12/2011

Frack Fluid ComponentsMOST of what is pumped is water, which is

produced back when the pressure is released.

A small amount of chemicals are added to the water to perform various functions in the frack job.

Fracking is NOT new…First frac was performed in 1947 in Kansas!

Volume Perspective

Frack ReferencesExcellent, Well Referenced Review of Hydraulic Fracks

FRAC ATTACK:RISKS, HYPE,

AND FINANCIAL REALITYOF HYDRAULIC FRACTURING

IN THE SHALE PLAYSJuly 8, 2010

David Pursell

Ann Davis Vaughan

http://www.tudorpickering.com/pdfs/TPH.Fracturing.Report.7-8-10.pdf

http://www.halliburton.com/public/projects/pubsdata/Hydraulic_Fracturing/index.html?SRC=MP

Halliburton Discloses Frack Fluid Components

Slide modified from Coskey, November 2010

FracFocus Chemical Disclosure Registryhttp:/fracfocus.org

Niobrara Acreage Price History

Wyoming & ColoradoNorthern DJ Basin Lease Bonus History

Dol

lars

/ A

cre

Niobrara Effect

EOG Jake well completed 9/5/2009

Courtesy: Pat Jackson

Regional DJIndustryActivity

Source: Lewis, R., CSM 2011

Wyoming

Nebraska

Colorado

• RKI Exploration• Chesapeake / CNOOC• East Resources (Shell)• Bill Barrett Corp• EOG Resources• Noble Energy• TARC• Anadarko – MBI• Slawson Exploration• Rubicon O&G… now

Chesapeake• Whiting Petroleum• SM Energy & Others…

Silo Field

Wattenberg Field

Acreage Holdings by Operator

From Peggy Williams, Hart Energy Publishing 10/2010

~5200 square miles

Noble Energy – Well Performance

Source: Noble Corporate Presentation March 2011

Gemini K Well500,000+ BOE

11 HZ Well Avg290,000 BOE

Avg Vertical Well40,000 BOE

What it Costs to Play the Game

For a 1 well program– Lease 640 acres at $2,000/acre: $1,280,000– Drill and complete lateral well: ~$4,000,000– $5,280,000 – 30 to 50 full-time jobs, touches 40 to 50 companies– It may take 30+ wells to evaluate a big acreage block– $158,000,000

• But if it works…? (gross numbers)

– ~200 BOPD * $85/BBL * 325 days: $5,525,000 / well / yr– 30 productive wells : $165,750,000 / 1st yr

Risk to Niobrara SuccessWhat could possibly go wrong?• Geologic Risk: Thermal maturity / matrix porosity

• Regulatory risk: no predictability to Fed policy– Fracture Stimulation Legislation– Environmental Obstructionism: “Impact on Global Climate

Change” … REALLY… Remember the Coccoliths

• Availability to infrastructure: Drilling rigs, water for completion, casing, transport equipment, etc.

• Takeaway capacity: Where will the oil go? Pipelines…

• Rocky Mountain refining capacity: Where will it be refined?

• And, the overriding risk… Commodity Price…?

Commodity Price Risk

Source: API and EIA data; published in Oil and Gas Journal

Depending on Cost Structure;Lease Cost, Rigs, Casing, Fracing, etcMany Horizontal Plays Need >$50-60 Oil

Week of 6/27/2011

The Niobrara Play – It’s not aloneNone these plays are on Federal Lands

Bakken / 3 Forks6-20 Billion BBLs

2nd largest gas field on the planet

0

500

1000

1500

2000

2500To

talN

umbe

rofP

arce

lsof

fere

dby

BLM

Availability of Federal Leases

46 YTD

More than 1500 parcels/yearNew MexicoUtahMontanaColoradoWyoming

New Administration

2050

2485

1675 1695

872

635

Data provided byPremier Data

Services

??

“2 parcels up for BLM Colorado, oil & gas lease auction” (1609 total acres)

Associated Press 05/12/2011

?

Cost of Imported Oil!

Source: API and EIA data; published in Oil and Gas Journal

Daily Cost OfCrude + Refined Products

1 $BILLION / DAY!!!

Week of 6/27/2011

• WHAT WE HAVE…• 10-20+ MMBO Generative Capacity / sq mile• Large generative area• Large oil-in-place potential• Horizontal Drilling• Staged Fracs• Ever Improving Technology• WHAT WE MAY HAVE…• A Billion Barrel Play?

The Real Game Changers

The Niobrara PlayWhere can it go from here?

?

Nancy Pelosi – Bio-Hybrid Prototype

Thank You!