1. Advanced Mud System for Microhole Coiled Tubing Drilling 16-17 August 2005 Prepared for: U. S. Department of Energy-NETL Microhole Technology Development Prepared by: Bandera Petroleum Exploration LLC IMPACT Technologies LLC IMPACT Technologies LLC Under Contract: Solicitation No. DE-PS2-03NT15392 Contract No. DE-FC26-04NT15476 CFA No. 08025237

2. Bandera Petroleum Exploration LLC Bruce Galbierz, P.E. - Principal Investigator 918.747.7771 X105 bruce@banderapetroleum.com IMPACT Technologies LLC Ken Oglesby, P.E. 918.627.8035 kdo@impact2u.com

3. Project Results (Budget Phase 1) Defined Mud Types and Properties suitable for MHT Defined Hydraulics Geometries and Conditions for MHT - Set envelope of operating parameters Developed Abrasive Slurry Jet (ASJ) Drilling System Evaluated and Identified Pumps suitable for MHT and ASJ Evaluated and Identified Mud Processing Equipment suitable for MHT and ASJ Explored non-traditional components and methods for the Mud System

4. and Well control

5. MHT Mud System Specifications Hole Specs: 3.5” hole; 5000’ TVD; 1000’ lateral Hole Specs: 3.5” hole; 5000’ TVD; 1000’ lateral Pump Flow Rate and Pressure Specs: Pump Flow Rate and Pressure Specs: 300 gpm @ 1000 psi; 10 gpm @ 5000 psi Flow Back Processing Specifications: Flow Back Processing Specifications: 500 gpm water based, oil based and gasified fluids Other Parameters: Other Parameters: Mix, circulate, clean and store 200 bbls water / diesel muds Mix, circulate, clean and store 200 bbls water / diesel muds Mud- types/function Mud- types/function Zero Discharge – “no fluids hit the ground” and Zero Discharge – “no fluids hit the ground” and “solids / liquids can be hauled” HSE Considerations HSE Considerations

8. Kemtron KTL48 Dual shaker Dual cones

9. Mud System Evolving Technologies Abrasive Slurry Jetting - ASJ High Pressure Slurry Pump Modular non-steel tank & piping Composite Coiled Tubing Sintered Carbide Surfacing Grind, Slurry & re-inject fluids & cuttings Clear water only discharge GLCC plus Horiz Directional Drilling/ Trenchless Ground TPO Liner

10. Results and Discussion Pumps Evaluated Kerr 3500 series National JWS185 Gardner Denver TEE series Tulsa Triplex TT series