OIL INDIA (USA) INC Three Allen Center, 333 Clay Street, Suite 3300, Houston, Texas, 77002 Ref: OILUA/GC/597/2017 Date: 20 th January, 2017 D (HR&BD) / D (O) / D (E&D) / D (F) / CMD Through: ED (BD) Sub: Monthly report of Oil India (USA) Inc. for the month of December 2016 and Write up on Collaboration in E&P Industry 1. Reference above please find herewith the monthly report for the month of December 2016, pertaining to Oil India (USA), Inc. 2. For your information and record please. (G. K. Sharma) Country Manager Attached: Detailed Report
OIL USA s Monthly Report December 2016 Collaboration is More than Just A Word.. Preamble: Collaboration has always been a feature of the oil and gas industry. The forces driving collaboration have varied, but the goal historically has been to create the efficiencies and technical fitness that ensure market participants do things right by avoiding errors of commission. For example, during the early oil boom in the United States, the common law right of capture gave each landowner ownership in the subsoil resources, resulting in many owners of a single reservoir who pursued competitive drilling and production practices that drastically reduced physical recovery and economic benefits. Consequently, some parties, compelled by either regulators or enlightened selfinterest, chose collaboration in the form of unitization as a solution. Unitization was one route to the now-common industry practice of joint ownership, which is catalyzed by market forces and governed by industry-standard Joint Operating Agreements ( JOAs ) that designate one owner as the operator and provide the remaining non-operating working interest parties significant opportunities for active participation through integrated project teams and other means. Outside of North America, JOAs are common, but so are Joint Ventures (JV) in which a more collaborative governance approach is utilized, but, technical-fitness drivers for collaboration remain. Collaboration: Conventional collaboration will continue to be important; however, emerging trends toward collaboration models focus on helping enterprises build an evolutionary fitness that ensures the enterprise is doing the right things and avoiding errors of omission. In this regard we would like to highlight three examples to show importance of collaboration in oil and gas industry 1. Purple Hayes Well (Fraczilla) US s longest Onshore Lateral Collaboration between Schlumberger & Halliburton a. Eclipse Resources, the operator, collaborated with Schlumberger for drilling and Haliburton for completing the Purple Hayes No. 1H in Guernsey County, Ohio, which is the longest lateral ever drilled onshore in the United States. b. With a total measured depth of 27,048 feet, the Purple Hayes lateral spans 18,544 feet, yet was drilled in only 17.6 days in a single bottom-hole assembly run. Eclipse Resources completed the well in 23.5 days, placing a plug-and-perf hydraulic fracturing stage every 150 feet along the 3.5 mile-long lateral, averaging 5.3 stages each day. When all the work was done, the total drilling and completion cost came in at $854 per foot of lateral, shattering any previous industry benchmark in the Utica
Shale. Initial production from Purple Hayes is being restricted to 5 million cubic feet of dry gas and 1,200 barrels of condensate a day to manage pressure drawdown. c. All the upfront planning resulted in Eclipse Resources bringing in its first super lateral under budget, with actual drilling and completion times beating predrill expectations. A major enabler to eliminating rig time was the ability to TD the entire lateral section with a single bit on a rotary steerable assembly. d. According to Schlumberger, who supervised and was responsible for drilling, the fiveblade, 81 2-inch bit was designed specifically for drilling extended lateral sections using its Power Drive Orbit rotary steerable system to minimize erosion while meeting requirements for both steerability and penetration rates. The bit was designed for optimal performance and improved cleaning using modeling solutions within the Schlumberger IDEAS integrated dynamic design and analysis platform, as well as computational fluid dynamics. e. The drilling and completion fluid was the only component in the system that required customizing for super lateral drilling. While the well s record lateral length made the headlines, the completion operation was no less newsworthy. Only one of the 125 total stages failed to effectively put away the 1,400 pounds pumped per foot of lateral. The efficiencies achieved during treatment allowed Eclipse to improve its daily completion rate by 20 percent over the original plan. f. Halliburton performed the frac treatment using dual-fuel and SandCastle proppant loading units equipped with dust control systems. The well also achieved a North American land plug setting depth record of 26,641 feet using Halliburton s Obsidian composite plugs. g. Other key contractors included Nine Energy Service, which provided the wireline work during the completion phase, and Deep Well Services, which performed snubbing services during frac plug mill-out and tubular installation. Nine Energy Service says it worked directly with Eclipse to design the plug-and-perf system using NOV s Cerberus modeling software, and completed all 124 stages with no nonproductive time or misruns. According to Deep Well Services, it enhanced the hydraulic rotary capabilities of its 285,000-pound stand-alone snubbing unit to accommodate the demands of Purple Hayes, achieving plug-back total depth at 26,868 feet. h. The success of this project is because they have the best technical team in the business. Eclipse Resources made the decision a few years ago to develop world-class technical expertise rather than consulting out functions such as directional drilling and mud or cement engineering. In addition to the ultra-long lateral, Purple Hayes is the first well to incorporate all three variables in Eclipse s optimized Utica completion design: 100-percent slick water, tighter stage spacing, and managed pressure drawdown.
2. Core Lab Industry Consortium A Collaborative Effort In North America over 95 member companies have formed a Joint Industry Project (JIP), wherein, they have contributed conventional core, well logs, completion, stimulation, and production data for a total of 195 unconventional shale wells to date. One vendor namely Core Lab has then performed an extensive core analysis program on each of these cores, core-log calibration for petro physical models and OGIP and OOIP calculations, and evaluated the completion, stimulation and production from these wells. In addition, Core Lab has synthesized these data and made comparisons of various Shale Reservoirs in terms of the key factors that relate to a Shale s productivity. All of these data and interpretations are provided in a webenabled Oracle database. a. Geological Analysis: Geological characterization of shale reservoirs is critical for effective reservoir exploitation. Data on depositional facies, environment, rock types, mineralogy, pore structure, clay types, and fractures is determined from each core. b. Petrophysical Properties: The determination of Petrophysical properties for the shale is crucial in formation evaluation, calibration of logs, and input for reservoir simulations. These data aid in the recognition of pay vs. non-pay and improve estimates of ultimate recovery (EUR). The Petrophysical properties are measured on selected core samples. c. Geomechanical Properties: Geomechanical properties of shales are needed for fracture stimulation designs and for horizontal well designs. d. Shale Fluid Sensitivity Tests: Capillary suction time tests (CST) will determine the relative sensitivity of the shales to various salinity fluids. A roller oven test also yields the degree of sensitivity (erosion) of the shales when in contact with various salinity fluids. e. Core Laboratories is expanding this collaboration industry-leading study of Shale Reservoirs to areas outside of North America as a Phase 2 to its original study. Participants in the Phase 2 Study will receive all of the data and interpretations from the North American Phase 1 Study and will contribute core and data from their own shale reservoirs. Participants will be able to leverage the North American data sets and technology in evaluating and developing their own shale reservoirs. These integrated data sets and case histories will provide operators with the critical
parameters to optimize their exploitation of these reservoirs and reduce finding and development costs. f. This project will consist of the characterization and evaluation of numerous conventional cores, rotary sidewall cores, and drill cutting samples taken from multiple wells targeting potentially productive shale formations from around the world. Specifically, these prospective shale sections will be analyzed for geological, Petrophysical, Geomechanical, geochemical, and production properties. These data will be integrated with well logs, stimulation designs, and production test information as available. This large and searchable database will provide operators with valuable information not only on their own wells but also on other operator s wells. The project will be focused on utilizing the experience of evaluating numerous North American shale wells in expanding the evaluation of shale reservoirs globally. g. Objectives: The primary objective of this project is to provide operators with measured geological, Petrophysical, Geomechanical, geochemical, and production properties of the shale formations globally in order to improve their formation evaluation and to optimize stimulation and production in North America suggests that understanding the similarities and differences in shales is the key to successful exploration and exploitation. The resultant database will be an invaluable tool to operators in evaluating, comparing, and designing completion and stimulation methods for shale formations. Core lab work in North America suggests that understanding the similarities and differences in shales is the key to successful exploration and exploitation. The resultant database is an invaluable tool to operators in evaluating, comparing, and designing completion and stimulation methods for shale formations. 3. Subsalt Imaging in Gulf of Mexico TGS collaborates with Schlumberger.. a. TGS-NOPEC Geophysical Company (TGS) provides multi-client geoscience data to oil and gas exploration and production companies worldwide. In addition to extensive global geophysical and geological data libraries that include multi-client seismic data, magnetic and gravity data, digital well logs, production data and directional surveys, TGS also offers advanced processing and imaging services, interpretation products, and data integration solutions. b. Schlumberger is the world's leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. Schlumberger supplies the industry's most comprehensive range of products and services, from exploration (Seismic API) through production, and integrated pore-to-
pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance. c. The Operational Details: In August, 2016, TGS and Schlumberger commenced Dual Coil Shooting* multi-vessel full-azimuth acquisition Revolution XII and XIII surveys in the U.S. Gulf of Mexico. The surveys will cover approximately 7,150 km 2 (306 blocks) in the Green Canyon, Atwater Valley and Ewing Bank protraction areas of the Central Gulf of Mexico. The Revolution XIl and XIII surveys will be acquired using the Schlumberger WesternGeco Q-Marine* point-receiver marine seismic system combined with the proprietary multi-vessel, Dual Coil Shooting acquisition technique, which will provide broadband, long-offset, full-azimuth data. This combination of leading-edge technology and technique will improve illumination and imaging of the sub-salt and other complex geologic features in this highly active region. Acquisition is expected to complete in late Q1 2017 with final processed data available in early 2018. With these new techniques, Schlumberger expects to see further improvements in sub-salt imaging and amplitude fidelity for reservoir characterization providing value for the customers. A. Operational Details of Niobrara JV: 1. Carrizo Gross Oil production for the Niobrara JV: Total Gross Oil production for Carrizo operated wells of the JV in the month of December 2016 was 105792.53 Bbls.
2. Carrizo Gross Gas production for the Niobrara JV: Total Gross Gas production for Carrizo operated wells of the JV in the month of December 2016 was 257176.3 MCF. 3. The Subsidiary (OIL USA) production share of Oil in NRI: OIL USA s per day Oil production (NRI) in the month of December 2016 was 286.04 Bbls/day.
4. The Subsidiary (OIL USA) production share of Gas in NRI: OIL USA s per day Gas production (NRI) in the month of December 2016 was 2724.8 MCF/day. 5. The Subsidiary (OIL USA) production in terms of BOE/day (NRI): OIL USA s per day Production in terms of BOE (NRI) in the month of December 2016 was 406.8 BOE/day.
Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 B. Revenue and Accounts: The monthly JIBs and net revenue earning from January 2015 to December 2016 is given as follows: 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Monthly Revenue vis-á-vis JIB Monthly JIB Monthly Revenue i) The total amount paid on Cash calls, JIBs to operators & non-operator partners till December, 2016 is US$ 89.3 Million. The break-up is as follows: Cash Calls & JIBS to Carrizo - US$ 71.9 Million. Noble Energy JIB - US$ 7.3 Million. Whiting Oil & Gas JIB- US$ 10.1 Million. ii) Total revenue received by Subsidiary till December 2016 is US$ 51.16 Million (cash received after Severance Tax), which is about 57.29% of total paid against Cash Calls and JIBs. The break-up of revenue generated by various operators are as follows: Carrizo - US$ 42.6 Million. Noble Energy - US$ 4.88 Million. Whiting Oil & Gas - US$ 3.68 Million. iii) Total reinvestment in the JV from revenue generated by Subsidiary till the month of December, 2016 is about US$ 44.2 Million.
iv) Total Acquisition Cost till date is US$ 66.05 Million, the break-up of which are as follows Niobrara JV Initial Acquisition Cost - US$ 55.0 Million Subsequent AMI Acquisition Cost - US$ 11.05 Million v) Additionally, OIL USA has incurred US$ 2.7 Million on payment of interest on Bank Loan, US$ 0.95 Million on General & Administrative Expenses and US$ 1.58 Million for employee benefits and additional Severance Tax of US$ 0.34 Million, Interest paid to parent company US$ 0.21 Million till December, 2016. vi) Share Capital is US$ 21.1 Million and Bank Loan is US$ 90.0 Million till December, 2016.