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2011<br />

JANUARY<br />

Applied Petrophysics in Reservoir<br />

Characterization of the Bakken<br />

(What makes Parshall special?)<br />

Dr. <strong>Anne</strong> <strong>Grau</strong> – <strong>Triangle</strong> <strong>Petroleum</strong><br />

Robert Sterling – Cirque Resources LP


Forward-Looking Statement<br />

This presentation includes a number of forward-looking statements that reflect the current views of our management with respect to future events and financial performance.<br />

You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those<br />

statements include statements regarding our and members of our management team’s intent, belief or current expectations as well as the assumptions on which such<br />

statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and<br />

uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.<br />

Readers are urged to carefully review and consider the various disclosures made by us in these materials and in our other reports we filed with the U.S. Securities and<br />

Exchange Commission. These presentation materials should be read in conjunction with the sections entitled “Management’s Discussion and Analysis of Financial Condition<br />

and Results of Operations,” “Consolidated Financial Statements” and notes related thereto in our Annual Report on Form 10-K for the year ended January 31, 2009 and our<br />

Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2009. Important factors currently known to our management could cause actual results to differ<br />

materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the<br />

occurrence of unanticipated events or changes in the future operating results over time. We believe that these assumptions are based upon reasonable data derived from and<br />

known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from these<br />

assumptions. Factors that could cause differences include, but are not limited to, our ability to find oil and gas reserves that are economically recoverable, the volatility of oil<br />

and gas prices, the uncertain economic conditions in the United States and globally, our ability to develop reserves and sustain production, our estimate of the sufficiency of<br />

our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, in prospect development and property acquisitions or<br />

dispositions and in projecting future rates of production or future reserves, the timing of development expenditures and drilling of wells, and the operating hazards attendant<br />

to the oil and gas business.<br />

Prior to 2010, the SEC generally permitted oil and gas companies, in their filings, to disclose only proved reserves that a company has demonstrated by actual production or<br />

conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Beginning with year-end reserves for 2009, the SEC<br />

permits the optional disclosure of probable and possible reserves. We use the terms “estimated ultimately recoverable,” or EUR, “resource potential,” “recoverable<br />

reserves” or other descriptions of volumes of hydrocarbons to describe volumes of resources potentially recoverable through additional drilling or recovery techniques that<br />

the SEC’s guidelines prohibit us from including in filings with the SEC. Estimates of resource potential, recoverable reserves or estimated ultimately recoverable amounts do<br />

not reflect volumes that are demonstrated as being commercially or technically recoverable. Even if commercially or technically recoverable, a significant recovery factor<br />

would be applied to these volumes to determine estimates of volumes of proved reserves. Accordingly, these estimates are by their nature more speculative than estimates of<br />

proved reserves and accordingly are subject to substantially greater risk of being actually realized by us. The methodology for resource potential, recoverable reserves or<br />

estimated ultimately recoverable amounts may also be different than the methodology and guidelines used by the Society of <strong>Petroleum</strong> Engineers and is different from the<br />

SEC’s guidelines for estimating probable and possible reserves.<br />

Furthermore, the forward looking statements contained in this presentation are made as of the date hereof, and we undertake no obligation, except as required by applicable<br />

securities legislation, to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise. The<br />

forward looking statements contained herein are expressly qualified by this cautionary statement.


Outline<br />

Going Back to the Beginning<br />

• A brief history of the Bakken Play evolution in the Williston Basin<br />

• Parshall Field Discovery in North Dakota<br />

Parshall Field Attributes<br />

• High EURS and rates of production<br />

Why Parshall is Special<br />

• Unique Middle Bakken Reservoir<br />

• Lithology & Stratigraphy<br />

• Diagenesis<br />

• Fracturing<br />

• Thick ―H‖<br />

• Unique Stratigraphic Trap<br />

• Unique Maturity Setting http://bakkenshaleoil.blogspot.com/<br />

• Unique pressuring<br />

• High <strong>Oil</strong> Saturation (Low water cut)<br />

Petrophysics<br />

• Applying Saturation models to multiple play types within the complex Middle Bakken


Middle Bakken: Large Area, Variable Deposition Patterns<br />

(Multiple Play types, Multiple Reservoir Targets)<br />

SASKATCHEWAN<br />

MANITOBA<br />

WILLISTON BASIN<br />

Poplar<br />

Dome<br />

Nesson<br />

Anticline<br />

Parshall Field<br />

2005<br />

MONTANA<br />

WYOMING<br />

Cedar Creek<br />

Anticline<br />

Little Knife<br />

Anticline<br />

Billings<br />

Anticline<br />

NORTH<br />

DAKOTA<br />

SOUTH<br />

DAKOTA<br />

Location Map with Structural Elements (after Heck et al., 2004,)


Bakken <strong>Petroleum</strong> System<br />

• Source Rock: Upper and Lower Bakken <strong>Shale</strong>s are <strong>World</strong><br />

Class<br />

• High TOC<br />

• Thermal History, Kitchen Identified by USGS (Price)<br />

• Generated 400+ Billion Barrels (USGS)<br />

• Unconventional Regional Reservoirs: Sourcerock/Reservoir<br />

couplets<br />

• Middle Bakken Mixed lithologies<br />

• Three Forks Dolomite, Silts and clays.<br />

• <strong>Tight</strong>: 4-8% Porosity, 0.01-0.001 md Perm<br />

• Lodgepole in US is thick impermeable Seal to Bakken.<br />

• “In-situ” <strong>Oil</strong> accumulation within Kitchen<br />

• Documented Lateral Migration of Bakken to NE into Canadian<br />

Fields where Bakken Source Rock is immature (migration)<br />

• Limited Documentation of Vertical Migration<br />

• Fracturing of <strong>Tight</strong> Reservoir Key to Producibility<br />

• Multiple Scales of Natural Fractures<br />

• Microfracturing within specific facies/lithologies<br />

• Macro fractures at bedding scale<br />

• Vertical (Tectonic)<br />

• Horizontal (Hydraulic from <strong>Oil</strong> Generation)<br />

• Composite/Oblique<br />

• Areal Lineaments, Faults, Fracture swarms<br />

• Areal Lineaments, Faults, Fracture Swarms<br />

• Completion Strategy Key to accessing reserves<br />

Jack Flannery and Jeff Kraus<br />

Search and Discovery Article #10105 (2006)<br />

Posted May 23, 2006<br />

5


Bakken Exploration In the Williston Basin<br />

‣ Vertical Well Production 1990’s Fractured<br />

<strong>Shale</strong> along Depositional Boundaries<br />

‣ Horizontal Wells:<br />

1. Early 2000’s Elm Coulee, MT<br />

• Unstimulated or Hail-Mary Frac’s<br />

• Shorter laterals 320’s<br />

BRIGHAM<br />

HYBRID<br />

COMPLETIONS<br />

2. 2005-2009: Parshall and North Dakota<br />

• Staged Completions (5-8),<br />

• Longer laterals 640’s and 1280’s<br />

ELM COULEE<br />

MT<br />

EOG<br />

PARSHALL<br />

DISCOVERY<br />

ND<br />

3. 2009+<br />

• Hybrid Extensive Staged<br />

Completions (―Brigham‖-style)<br />

• Longer Laterals 1280’s+<br />

http://www.theoildrum.com/node/3868


Parshall Field Discovery 2006: Bakken Horizontal<br />

Drilling in North Dakota<br />

<strong>From</strong> Wikipedia: ―Bakken‖<br />

The greatest Bakken oil production comes from Elm Coulee <strong>Oil</strong> Field, Richland County, Montana, where<br />

production began in 2000 and is expected to ultimately total 270 million barrels. In 2007, production from<br />

Elm Coulee averaged 53,000 barrels per day (8,400 m 3 /d) — more than the entire state of Montana a few<br />

years earlier. [12]<br />

New interest developed in 2007 when EOG Resources out of Houston, Texas reported that a single well it<br />

had drilled into an oil-rich layer of shale below Parshall, North Dakota was anticipated to produce<br />

700,000 barrels (111,000 m 3 ) of oil. [13] This, combined with other factors, including an oil-drilling tax break<br />

enacted by the state of North Dakota in 2007, [14] shifted attention in the Bakken from Montana to the North<br />

Dakota side. [citation needed] The number of wells drilled in the North Dakota Bakken jumped from 300 in 2006 [15]<br />

to 457 in 2007. [16] Those same sources show oil production in the North Dakota Bakken increasing 229%,<br />

from 2.2 million barrels (350,000 m 3 ) in 2006 to 7.4 million barrels (1,180,000 m 3 ) in 2007.


Evolution of Parshall Field Area<br />

How did EOG get here first and why did they like this<br />

prospect?<br />

EOG was actively exploring in this area<br />

EOG was actively playing Elm Coulee<br />

EOG had a unique experience in all disciplines in<br />

unconventional reservoirs at that time<br />

Jim Peterson & team were looking for<br />

• Resistivity anomalies<br />

• Elm Coulee analogues<br />

2005: Jim P. Identified several resistivity anomalies<br />

east of Nesson Anticline<br />

• Leased and drilled the Nelson Fms 1-24 to try to test<br />

―clean zone‖ seen in Gulf Nelson Fms. 1<br />

• Digital data derived an Archie SW model<br />

• Land block at Parshall area looked interesting based<br />

on petrophysical model<br />

• Purchased acreage from Mike Johnson, et al<br />

Drilling as of 12/31/2005<br />

2006 PARSHALL DISCOVERY WELL WAS<br />

DRILLED IN 2006


Evolution of Parshall Field Area<br />

2005: EOG Resources & Hess drilled<br />

Nelson Fms 1-24 (8/2005)<br />

4500’ lateral<br />

Single stage frac 463K#<br />

IP 155 BOD 102 BWD<br />

1981<br />

Lear <strong>Petroleum</strong> Exploration<br />

Parshall SD 1<br />

s. 3 152N 90W<br />

Upper <strong>Shale</strong><br />

Later 2005:<br />

EOG acquired ~38,200 gross acres from<br />

Mike Johnson, et al, to drill a well near the<br />

Lear Parshall SD 1<br />

Middle<br />

Bakken<br />

Lower <strong>Shale</strong><br />

Drilling as of 12/31/2005


Evolution of Parshall Field Area: Lear Well<br />

1981<br />

Lear <strong>Petroleum</strong> Exploration<br />

Parshall SD 1<br />

s. 3 152N 90W<br />

Prospect Generator: Mike Johnson noted<br />

• Resistivity anomaly<br />

• A possible Elm Coulee analog (―sand‖)<br />

• Very Subtle Shows<br />

Ultimately, EOG drilled Parshall 1-36H Discovery Well<br />

1200’ away from this well


EOG Parshall 1-36 (Parshall Discovery Well)<br />

Lear Parshall<br />

SD1<br />

EOG Parshall<br />

1-36H<br />

1200’<br />

Middle Bakken<br />

•EOG Drilled the Parshall 1-36H and completed the well in 6/2006 flowing<br />

463 BOD and 0 BWD<br />

•The total lateral length was approximately 1800‟<br />

•Open Hole unstimulated<br />

•Well experienced severe pressure and oil and gas to surface while drilling.<br />

Pressure was way more than expected<br />

•“Clean Zone” was not encountered in the wellbore


Evolution of Parshall Field Area:<br />

Parshall Discovery Well<br />

Parshall 1-36H lateral did not see ―clean<br />

zone‖ (Elm Coulee Analog) but indications of<br />

high pressure and flowing oil encouraged<br />

EOG to drill second well<br />

Core from Parshall 2-36 provided much<br />

understanding of the nature of the<br />

accumulation.<br />

The Parshall 2-36H was the first multistage<br />

frac in the Williston Basin Bakken<br />

• Recommended by Engineer Barb<br />

Ganong due to previous experience<br />

in Monterey, Barnett and other EOG<br />

unconventional programs.<br />

Engineering solutions for well drilling and<br />

completion advanced the play to its present<br />

state<br />

A fully integrated approach with all disciplines<br />

from geology, engineering and land led to the<br />

success of Parshall Field.


Drilling as of 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010


EUR Bakken Wells Only


Parshall’s Special Attributes<br />

• Unique Middle Bakken Reservoir<br />

• Lithology & Stratigraphy<br />

• Diagenesis<br />

• Fracturing<br />

• Thick “H”<br />

• Unique Stratigraphic Trap<br />

• Unique Maturity Setting<br />

• Unique pressuring<br />

• High <strong>Oil</strong> Saturation (Low water cut)<br />

• High EURS and rates of production


Blakey Depositional Setting for Bakken<br />

• Widespread Carbonate Deposition in NA<br />

• Williston Basin on Equator<br />

• Bakken: Mixed Carbonate Clastics<br />

• Clastic influence from Landmass<br />

NE, E, and SE<br />

Ron Blakey, NAU Geology


Present-Day Belize Model<br />

Mixed Carbonate Clastic Equatoiral Setting<br />

• Shallow Shelf & Shoreline<br />

• Transitional facies Pattern<br />

• Sediments from Maya Mountains (SW)<br />

• Point sources of Sand Influx (rivers)<br />

• Distribution of sand by long shore drift to<br />

south<br />

• Barrier Reef acts as protection to carbonate<br />

restricted area (N)<br />

Dr. Clif Jordan, 2002<br />

Belize image from Geology.com<br />

1 mi


Middle Bakken: Large Area, Variable Deposition Patterns<br />

(Multiple Play types, Multiple Reservoir Targets)<br />

SASKATCHEWAN<br />

MANITOBA<br />

WILLISTON BASIN<br />

Poplar<br />

Dome<br />

Nesson<br />

Anticline<br />

MONTANA<br />

WYOMING<br />

Cedar Creek<br />

Anticline<br />

Little Knife<br />

Anticline<br />

Billings<br />

Anticline<br />

NORTH<br />

DAKOTA<br />

SOUTH<br />

DAKOTA<br />

Location Map with Structural Elements (after Heck et al., 2004, Belize image from Geology.com)


ISOPACH<br />

TOTAL MIDDLE BAKKEN<br />

•Represents what most consider to be the<br />

distribution of ―the Bakken play‖<br />

•Consists of all Middle Bakken lithologies<br />

•Depositional thick along and east of<br />

Nesson Anticline<br />

Total Middle Bakken<br />

Isopach Interval


ISOPACH<br />

LOWER MIDDLE BAKKEN<br />

•Consists of heterogeneous lithologies<br />

•Depositional thick along and east of<br />

Nesson Anticline<br />

Lower Middle Bakken<br />

Isopach Interval<br />

Photos from NDIC and NDGS


ISOPACH<br />

UPPER MIDDLE BAKKEN<br />

•Facies consistant across this part of the basin<br />

•Primary sedimentary structures preserved<br />

•Interbedded algal and dolomite material<br />

•Represents a resticted, hypersaline environment<br />

•Lagoonal restriction caused by movement of<br />

Nesson Anticline- time of Dolomitization<br />

Upper Middle Bakken<br />

Isopach Interval<br />

Photos from NDIC and NDGS


Stratigraphic Model for Parshall<br />

EOGR<br />

Shell Creek 1-01<br />

S1 152N 90W<br />

2.1 Miles<br />

Lear <strong>Petroleum</strong><br />

Parshall SD 1<br />

1.3 Miles<br />

S3 152N 90W<br />

EOGR<br />

Parshall Parshall 2-36<br />

S36 153N 90W


Diagentic Model for Parshall<br />

Dolomitization shortly after deposition of Upper Middle Bakken<br />

•Upper Middle Bakken- Time of Dolomitization<br />

• Algal laminated facies at Parshall<br />

• Dolomitic silts with organic rich algal laminae<br />

•Shoal: ―Clean Gamma‖ Unit<br />

• Limey Ooid to Skeletal Grainstone<br />

• Very low porosity; Self cementing at deposition<br />

• Intermittent in eastern ―Parshall‖ trend<br />

•Lower Middle Bakken<br />

• Bioturbated facies<br />

Dolomitization<br />

– Represents Early conversion of<br />

– CaCO3 -- CaMg(CO3)2<br />

– Recrystallization with larger Crystals<br />

– Results in New Rock Fabric<br />

– Creates Porosity<br />

– Microfractured Texture at Parshall<br />

– BETTER RESERVOIR ROCK<br />

– Associated with Higher <strong>Oil</strong><br />

Saturation at Parshall<br />

• Dolomitic and limey silt interbeds<br />

• Poor dolomitization underneath shoals<br />

DOLOMITIZATION<br />

Limey ooid shoal<br />

Little or no Dolomite<br />

SHOAL<br />

SHADOW<br />

SHOAL<br />

Upper Middle Bakken<br />

Lower Middle Bakken


Diagentic Model for Parshall<br />

Dolomitization shortly after deposition of Upper Middle Bakken<br />

Ubiquitous<br />

Dolomitization<br />

Increases<br />

Reservoir H<br />

Limey ooid shoal<br />

Little or no Dolomite<br />

Upper Middle Bakken<br />

Lower Middle Bakken


Middle Bakken Reservoir Properties at<br />

Parshall Field<br />

Horizontal Fractures in EOG Hoff 1-H<br />

Photo from NDIC Website<br />

Fracturing at All Scales<br />

Contributes to<br />

Reservoir Performance<br />

Parshall Area<br />

Lineaments<br />

Vertical Fracture in EOG Long 1-H<br />

Photo from NDIC Website


Middle Bakken Reservoir Properties at<br />

Parshall Field<br />

Facies<br />

Parshall 2-36 Pilot Hole<br />

Discovery Well<br />

~35+ Feet of Reservoir H<br />

All Porous Dolomite (>4%)<br />

Scales of Fracturing<br />

Microfractured, Microporous<br />

Stratigraphy<br />

Diagenesis<br />

Fracturing<br />

Control Development of<br />

Parshall “Super” Reservoir


Whiting Stratigraphic Model for Sanish Field<br />

Modified from Whiting <strong>Petroleum</strong><br />

GR MKR<br />

UMB<br />

LMB


Maturity Models<br />

• Parshall is at edge of Maturity Window<br />

• Several Schools of thought:<br />

• Power-charged by thick lower Bakken Source rock<br />

west of Parshall Field<br />

• Upper Middle Bakken Internal TOC (Algal<br />

Dolomites) in-situ sourcing<br />

• Thermal Maturity Barrier acts as Pressure Trap


Lower Bakken <strong>Shale</strong> Isopach<br />

Lower Bakken <strong>Shale</strong> Isopach (ft)<br />

Red = > 45’<br />

Bakken EURS Bubbles<br />

Qualitative


Middle Bakken: Internal source of TOC<br />

Algal Bioherm in EOG Hoff 1-H<br />

Photo from NDIC Website


Source Rock Maturity<br />

• Map initially made with Upper <strong>Shale</strong><br />

cuttings Rock Eval data from Price<br />

(USGS)<br />

• 10 wells had core and cuttings Rock<br />

Eval data<br />

• Correcting cuttings to core (approx 4<br />

deg shift up)<br />

• TMAX 426 contour appears to<br />

coincide with onset of generation<br />

• Lineament distribution and<br />

magnitude appear to control<br />

basement heat flux<br />

– Accounts for lateral “shoulders” in<br />

updip maturity<br />

TMAX Upper <strong>Shale</strong>


Upper Bakken <strong>Shale</strong> – Hydrogen Index „Surface<br />

Hydrogen Index as a Proxy for Maturity by R. J. Coskey<br />

Parshall-Austin<br />

The „HI Wall‟<br />

HI<br />

HI < 100<br />

Mature<br />

HI > 600<br />

Immature<br />

Bailey Area<br />

n = 579


Pressure Gradient Map<br />

Middle Bakken Formation<br />

• Gradient highest at<br />

Parshall <strong>Oil</strong> Field<br />

• Pressure decreases<br />

towards Sanish Field<br />

• Over pressured trend<br />

continues to the<br />

north<br />

• TMAX 426 Contour<br />

shows updip of<br />

thermal Maturity<br />

.43 .71<br />

Sterling 2010


Water Saturation for Upper Middle Bakken<br />

• Upper Middle Bakken<br />

– Lithofacies 4 (LaFever)<br />

– Lithofacies D (Cantor)<br />

• Best regional zone to map<br />

due to consistent<br />

Lithology<br />

• Maximum Saturation at<br />

Parshall <strong>Oil</strong> Field<br />

• Lineaments effect<br />

distribution of oil<br />

saturation<br />

• TMAX 426 contour shows<br />

updip thermal maturity<br />

limit<br />

.25 .60<br />

Sterling 2010


Pressure and Sw (UMB) Correlate


Relationship of Sw and Pressure Gradient<br />

Sw vs BHP Gradient<br />

Water Saturation vs Bottom Hole Pressure Gradient for Upper Middle Bakken<br />

1<br />

0.9<br />

0.8<br />

Parshall Field<br />

y = -0.2652Ln(x) + 0.2887<br />

R 2 = 0.6722<br />

0.7<br />

0.6<br />

Gradient<br />

0.5<br />

0.4<br />

0.3<br />

0.2<br />

0.1<br />

0<br />

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1<br />

Calculated Water Saturation in Upper Middle Bakken


Bakken Petrophysical Challenges<br />

• Archie Equation works well<br />

– Sw = (a * Rw / ( RT * PHIA^m) )^(1/n)<br />

• Heterogeneous lithology<br />

– 15-30% QTZ<br />

– 20-60% Calcite<br />

– 30-50% Dolomite<br />

• Highly saturated formation water<br />

• Cementation (m) and Saturation (n)<br />

Exponents are variable with lithology<br />

• Matrix density varies with lithology<br />

• Calibrating logs to core is<br />

essential in finding<br />

solutions


Comparison of similar log character in Core<br />

(and the trouble with Rasters)<br />

West NESSON ANTICLINE<br />

East Southeast<br />

Silty Clay-rich Limestone<br />

Partially Dolomitized<br />

Limestone<br />

Dolomite<br />

Clay-rich Silt


Acknowledgements<br />

• EOG Bakken Team, Past, Present, and Future<br />

• Bob Coskey<br />

• Mike Johnson<br />

• USGS Price Dataset<br />

• Cirque<br />

• <strong>Triangle</strong>

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