1. Archer drilling tool cost and benefit analysis Jake Bassett

2. Safety Moment 2

3. Presentation Outline Drilling introduction Drilling Process Drilling tools Archer Motor Costs and benefits Archer data collection Process NTP hours Final condensed data Archer use conclusion Time Money Cost vs. benefit Other possible avenues

4. Time is Money! 4 Less time Lower cost Larger profit

5. Drilling Introduction 5 Wells are not straight. The well pipe is very small. Nothing ever goes as planned.

6. Drilling Process 6 PRESURFINT1PROD1RUNPRDOTHCMPRUNCMP Phase diagram

7. Drilling Process 7 PRESURFINT1PROD1RUNPRDOTHCMPRUNCMP Phase diagram

9. 9 uERD Island

10. Liberty Development History 10 Liberty uERD Northstar

11. Capital Value Process (CVP) Stages 11

12. Liberty Timeline 12 Lease Expires End 2012 Retain Lease SOP DPP First Oil End 2020 End 2014 Contingent Upon PRR October 2013 DCUS August 31 2013 Concept SelectionConcept Definition

13. The Benefits of Accurate Time and Cost Estimation 13 30% of BP’s CapEx is on wells 1.Help the company to invest in the most profitable projects 2.Allow projects to be optimized for value: compare time and cost of different options 3.Improve understanding, and therefore management, of risks 4.Help to plan and optimize schedules Poor estimates = bottlenecks 5.Cost overruns = “De-Scoping” 6.Internal and external reputation

14. Scope of Estimate  10 Wells (6 Prod + 3 Water Inj +1 Gas Inj)  CRI Well  G&I Plant  Life-of-Well Interventions  Capping Equipment  P&A Cost  Bring Nabors 33E Up to API Spec  Rig Mob and Demob 14

15. Key Assumptions  Existing rig  Big bore well design  Cemented and perforated completion  Seasonal drilling restrictions will apply  3% flat escalation  Slowdown factor (more later) 15

16. Time and Cost Estimation Pre-1990s: Deterministic Model After Work Party 25 People 2 drinks each $6 per drink 25 x 2 x 6 = $300 16 “Best Estimate” How sure are you?

17. Current Model: Probabilistic Time and Cost Estimate ItemMinLikelyMax Number of People152535 Drinks per Person2-4 Price per Drink3-10 17 Sample 1: 18 people x 3 drinks per person x $7 per drink = $378 Sample 2: 24 people x 2 drinks per person x $5 per drink = $240 Sample 3: 28 people x 4 drinks per person x $9 per drink = $1008

18. Probabilistic Estimate: Captures Uncertainty 18 “The party is probably going to cost you around $490. I’m 90% sure it’ll cost more than $250, and less than $770.”

19. Monte Carlo Analysis 19 Repeated Random Sampling “Model phenomena with significant uncertainty in inputs.”

20. D&C Cost Estimation Process 20 Plan the Estimate Gather Data Define Inputs Compute Validate and Document Use the Results

21. Gather Data 21 What will drive well time? Well DesignOperationsGeology Big BoreIsland! PSI Northstar Endicott Northstar Year Drilled

22. Rig Move Different Offset Wells for Different Phases 22 Northstar MIRUMost Recent Wells Drill 16” Surface Hole Northstar PSI Drill 8-1/2” Production Hole PSI

23. Define Inputs: Tendency to Underestimate Range 23 Days

24. Representative Input Distributions 24 DataFit Spreadsheet

25. Slowdown Factor 25 Qualitatively – we are drilling wells slower, at higher cost How much slower? WellDateNPT HrsNPT PercentWell DaysWell Cost ($mm) Z-115June 201240.5232.39.3 PSI-01June 2002235.6017.03.7 Take out NPT, compare Days/10k Same well, compare old and new time estimator 31.2% Slower 25.1% Slower

26. Define Inputs: Cost Model Rotary AFE Estimator  What are we paying for now? Budgetary quotes from contractors  More certainty on big ticket items Northstar costs  What did we pay for on a similar island development? Expected cost -5/+50%  Contract uncertainty (not applied universally) 26

27. Results: D&C Time and Cost Estimate 27 MeanP10P90 Project D&C Days503449559 Project D&C Cost ($mm)243222265 Headline Results

28. Results: D&C Time and Cost Estimate 28 -11%+11%

29. Results: D&C Time and Cost Estimate 29 -9%+9%

30. Escalation, UAP, aUAP 30

31. Results: Wells Cost Estimate (Escalated) Cost CategoryCost ($mm) Drilling and Completions310.0 Life-of-Well Interventions, P&A227.1 G&I Plant43.2 Rig Mobilization and RISOP32.8 Bring Nabors 33E Up to API Spec18.0 Rig Demobilization16.9 Well Capping Equipment3.4 Drilling Staff5.1 Project Base Cost Estimate656.6 UAP (20%)131.3 Performance Target787.9 aUAP (27.5%)216.7 Not-to-Exceed Cost1004.6 31

32. Results: Wells Cost Estimate (Escalated) 32 Base Cost Estimate$657mm Performance Target$788mm Not-to-Exceed Cost$1005mm

33. Analysis: Benchmarking Days/10K 33 Purpose: validate the model

34. Risks/Uncertainties RiskCostMitigation Delays prevent project completion in two drilling seasons $15mm in rig standby, delayed production profile Move rig to island ASAP, focused plan for RISOP Worst case discharge concerns alter well design Unknown. More wells, two rigs? UAP. Relief Well Rig (On contract? Standby on island?) Worst case – warm standby for 3 years. $43mm. Work with regulators. (Highly dependent on company’s risk tolerance). UAP. 34

35. Opportunities Operate efficiently – complete project in two drilling seasons Design in well capping capability, work with regulators and internal requirements to not require a relief well island 35

36. Acknowledgements Scott Kolstad Kris Honas Rahul Madarapu Hugh Williamson Skip Pennebaker JoAnna Tomuro 36