EFD Workshop The Woodlands , TX October 22, 2015

Agenda

• FlexGen® Power Systems Company Overview

• What is a FlexGen® Solid State Generator (SSG)?

• Land Drilling Solutions

• Production Power Solutions

• Q & A

1

• FlexGen Power Systems (FPS) develops, manufactures, and services innovative power products for oil & gas operators in drilling, production power, and offshore applications

• Our core technology and IP combine traditional combustion power generation with a product called a Solid State Generator (SSG), which combines software, high efficiency power conversion, and advanced energy storage

• FlexGen’s SSG products have been fielded globally for 5+ years in the U.S. military and have reduced generator fuel consumption by 52% and maintenance by over 80%. Based on those results, FPS’ technology is now being integrated into every generator in the military inventory

• Our first three super independent customers estimate that our technology will deliver $200 - $450M in addressable annual cost savings in equipment CAPEX, fuel consumption, maintenance, and emissions, plus dramatically improved power quality and reliability, on every drill rig and production well

• FPS recently completed a $25.5mm Series A round including Altira, GE, and Caterpillar to scale its technology in oil & gas and industrial power markets globally

2

Executive Summary

• FlexGen’s SSG can deliver meaningful enterprise-wide addressable annual cost savings immediately to current operations and, as activity levels return to normal:

Additional Benefits: • 15-45% emissions reductions on every rig and genset • Low risk implementation and positive cash flow to the operator on Day 1

• FPS equipment is plug-and-play in the field (no significant change to standard operating procedures and minimal commissioning time)

• FPS leases equipment at cash flow positive day rates from Day 1

Operations SSG Annual

Savings / Unit Annual Enterprise Savings

Current Ops Normalized

Drilling $1.0 – $1.1M 20 rigs => $21 - $25M

85 rigs => $87 - $107M

Production – Genset Power $125 – $390k 200 gensets =>

$25 - $78M 450 gensets => $57 - $175M

Production – High Line Power $36 – $83k 2,000 wells =>

$72 - $165M 5,000 wells => $180 - $416M

3

Enterprise Cost Savings & Benefits for Operators

• Diesel and gas generator and gas turbine power systems are highly inefficient

• Generation is sized for peak loads, load steps, and motor inrush currents

• Generators and turbines therefore operate at low load factors, typically 10-30% of rated capacity and experience exponentially higher fuel consumption, maintenance, and emissions

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

1 6 11 16 21 26 31 36 41 46

Load Factor (%)

Fuel

Con

sum

ptio

n (%

of O

ptim

al)

0 5 10 15 20 25 30 35 40 45 50

Customers typically estimate that they operate at 50-80% load

Most actually operate at 10-30% load, where fuel consumption is 20-50%

higher

Generator Fuel Consumption

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49

Emis

sion

s (%

of o

ptim

al)

Load factor (%)

NOx

CO2

PM

• Genset load factors in off-grid applications are typically 15-30%, resulting in a 20-30% increase in emissions

• Transient loading causes an additional 30-45% increase

Emissions at Various Load Factors

Source: EPA

1500hp Land Rig Electrical Load Profile

Time (56 days)

Load

Fac

tor (

% o

f Tot

al)

4

Problem: Generator Performance & Inefficiency

• The SSG combines advanced energy storage, high efficiency power electronics, and adaptive system and component level software controls to optimize power system performance, capital, and operating cost

• The SSG charges and discharges automatically and instantaneously to absorb load variability, allowing the generators to ramp smoothly and efficiently regardless of load demand

• SSG is a modular, scalable, and provides voltage and frequency support to the AC or DC bus in generator power systems from 3kW-4MW

Adaptive Control Technology (ACT) Software

ESM Software

Energy Storage Module

(Battery or UCAP)

Fully-Optimized Power Conversion Software DC/DC Power

Converter Hardware

AC/DC Power

Converter Hardware

Solid State Generator

5

Solution: Solid State Generator (SSG)

Current Rig Power Supply FlexGen SSG Power Supply

ON/OFF ON ON

ON

ON

• 1.2MW SSG substitutes energy storage for excess genset horsepower, delivering improved power quality, performance, and reliability

• Fewer generators operating at higher average loads = significantly reduced fuel consumption, maintenance, and emissions

• Eliminates rig blackouts • Faster drilling and reduced time to completion • Significantly increases dual fuel gensets’ gas substitution rates

6

Land Drilling Power Solution

7

SSG is cash flow positive on Day 1

Daily SSG Savings per Rig

Operator Drilling

Contractor Total Operational Expenditure (OPEX) Savings

Fuel Savings1 $ 842 $ 842 Maintenance Savings2 $ 396 $ 396 Emissions Savings 15-45% $ -

Rig Performance Savings Clean power; less non-productive time3 $ 625 $ 625 Clean power; acclerated well bore construction4 $ 625 $ 625 Faster tripping5 $ 104 $ 104

Capital Expediture (CAPEX) Savings Amortized value of #3 3512C diesel genset6 $ 288 $ 288 Reduced runtime of #2 3512C diesel genset7 $ 72 $ 72 Amortized value of #3 bi-fuel kit8 $ 91 $ 91 VFD House & Top Drive electrical cost out9 $ 68 $ 68

Total $ 1,467 $ 1,576 $ 3,043

1Empirical fuel savings calculated on Nabors Rig 188 during comparable 9.625" intermediate drilling sections ($2.22/gal diesel; $1.19/gal LNG). 2Maintenance cost of one 3512C estimated at $16.50/hr (Holt & Wagner Caterpillar). Confirmed by Nabors Drilling and Precision Drilling. 315 minutes of Drilling contractor non-productive time saved from blackouts/brownouts, power surges, and power system faults ($60,000/day all-in drilling expense). 415 minutes of faster wellbore construction for the Operator from eliminated blackouts/brownouts, power surges, and power system faults ($60,000/day all-in drilling expense). 5Average of 15 minutes per day due to faster tripping ($60,000/day all-in drilling expense). 63512C purchase price of $315,000 amortized over 3 years to major overhaul (0% carrying cost). 7#2 3512C runtime reduced by 25%. 8Caterpillar DGB bi-fuel kit purchase price of $100,000 amortized over 3 years (0% carrying cost). 9Eliminated DC Choppers and associated electrical gear of $75,000 amortized over 3 years (0% carrying cost).

Land Drilling Value Proposition

Encana/Jonah Energy (Ensign Drilling) • Dates: Sep - Oct 2014 • Location: Jonah Field, WY • Rig Specs

• 1200 hp • 2 x Jenbacher J320 natural gas gensets • Field gas • 1 x Cat C27 • Woodward controls

• Highlights • Completed 3 wells • <2 J320 operations 100% of the time • 25 hours of single genset operations • Wells completed 55 hours ahead of schedule • Eliminated rig blackouts; previously 1-2/day • 1 day/no hardware commissioning

• Lessons Learned • SSG enabled faster drawworks speed/tripping • Further optimization available with rig control tuning (power

limiter tuning)

Apache (Nabors Drilling) • Dates: Dec 2014 – Mar 2015 • Location: near Amarillo, TX • Rig Specs

• 1500 hp • 3 x Cat 3512C • 3 x Hythane bi-fuel kits • Ross Hill controls

• Highlights • Eliminated need for #3 genset • Reduced diesel use by 509 gal/day • Reduced genset maintenance by $300-400/day • 1 day/no hardware commissioning

• Lessons Learned • Significant further optimization/value achievable with rig

tuning (Ross Hill controllers)

9

Land Drilling Case Studies

Apache (Patterson-UTI Drilling) • Dates: June 2015 – present • Location: Midland, TX • Rig Specs

• 1000 hp • 3 x Cat 3512C • 3 x Caterpillar DGB bi-fuel kits • 3rd mud pump (non-rig connected Cat 3512C prime mover) • NOV SCR drive house & controls

• Highlights • Eliminated need for #3 genset • Reduced diesel use • Reduced genset maintenance by ~$200/day • 1 day/no hardware commissioning

• Lessons Learned • Significant further optimization/value achievable with rig tuning of NOV controls

10

Land Drilling Case Studies cont.

• Third-party testing documented SSG Microgrid emissions reductions: • CO – 58% • NO – 30% • NO2 – 55% • NOX – 63% • H2 – 52%

11

Emission Reductions

Production Power

Current Field Power Supply SSG Power Supply

13

FlexGen® SSG Solution • FlexGen® SSG substitutes energy storage for excess genset capacity,

delivering improved power quality, performance, and reliability • Smaller generators operating at higher average loads; significantly lower fuel

consumption, maintenance, and emissions • Reduces genset maintenance by operating at rated power outputs

• Improves power quality and reduces downtime with solid state power outputs

• Enables reliable use of micro-turbines and Tier IV gensets

~150ekW

SSG ~150ekW

~75ekW

SSG is cash flow positive on Day 1

Production Power Solution – Solid State Generator

Production Power Savings via FlexGen® SSG Estimated Daily Value

(1 well pad) Fuel Savings1 $85 Smaller Genset Day Rate Savings2 $75 Downtime prevention3 $180 Maintenance Reduction4 $22 Cleaner Power5 $109 Emissions Savings $20 Increased Reliability Not calculated at this time Improved Analytics Not calculated at this time Total Daily Value $491 1Difference between 1 x 150ekW genset operating at 30% load and 75ekW genset operaating at 75% load ($2.00/gal diesel) 2Difference between day rates for 150ekW genset ($150) and 75ekW genset ($75)($1 per ekW) 3 15 min of additional uptime per day via blackout prevention yields 4 additional barrels of oil a day for a pumpjack (assuming 400 barrels a day @$45) 4 Yearly Maintenance costs for Tier IV gensets is $10,000 (source: Stallion Oilfield Services), with SSG Maintenance yearly maintenance cost is $2,000 5 Difference between 18-pole and 6-pole VSD ($40,000 amortized over 365 days)

+ + =

14

Value Proposition

Solid State Generator Technology Development

Battlefield Industrial

Probe

Feasibility Key

Customers Requirements

Prototype “100 Days”

Cost Suppliers

Regulatory

Prove Reliability Reliability Reliability

Performance

Products Margin

Diversity Channels

Scale

Genset OEM

Grid Edge Oil & Gas

15

Rapid Product Development

Q&A

Appendix

17

18 08JUL

Drilling, TOH, TIH, Drilling (to 9142)’ 07JUL

Lateral Drilling (7872 – 8664’) 06JUL

BOP test, Circulate, TOH, TIH (to 7789’)

Rig’s Active Power (kW)

kW

kVar

kW

Rig’s Reactive Power (kVar)

FlexGen SSG Power (kW)

Rig Load Profile during various Operations

19

SSG Power (kW) kW

-590 kW

810 kW

SSG deploys energy and recharges during rapid, heavy load steps

FlexGen® SSG Power close-up

Rig Pilot Performance Nabors Rig 188

20

SSG on

Clean Power

SSG off

Dirty Power

Block Height (ft)

Total Genset Power (kW)

Frequency (Hz)

21

FlexGen® SSG Provides Cleaner, More Reliable Power

Surface Intermediate Lateral

Bit Position

372’

6619’

Total rig load (kW)

22

Nabors rig operations (28Oct – 09Nov2014)

Nabors rig optimization with FlexGen®SSG (28Oct – 09Nov)

Surface Intermediate Lateral

Operation Single Genset op Dual Genset op Triple Genset opBit change 0 0 3Circulating 0 0 1Circulating / Maintenance 0 0 7Intermediate drilling 0 21 87Surface Drilling 0 5 10Trip in 0 1 13Well Prep 2 26 8Maintenance 6 13 20Drilling 0 0 59Rig off 0 0 0Trip Out 1 0 0 5Trip out 2 0 0 4Grand Total 8 66 216

Operation Single Genset op Dual Genset op Triple Genset opBit change 3 0 0Circulating 0 0 1Circulating / Maintenance 0 7 0Intermediate drilling 0 108 0Surface Drilling 0 15 0Trip in 14 0 0Well Prep 36 0 0Maintenance 39 0 0Drilling 0 59 0Rig off 0 0 0Trip Out 1 4 1 0Trip out 2 3 1 0Grand Total 99 191 1

• 3 genset operations shift to 1 or 2 gensets

• Increase bi-fuel kit usage by 7.5hrs/day

• Increase genset load factor above 50% 15hrs/day

Total rig load (kW)

23

Load Factor improvement with FlexGen® SSG

Gensets run at higher load factors with FlexGen® SSG:

• Maintenance and emissions decrease

• Fuel economy increases

• Genset #3 chart is not needed; results in add’l fuel, maintenance, and emissions savings

w/ SSG w/o SSG

Gen #1

Gen #2 w/ SSG w/o SSG

24

25

Rig Pilot Performance Ensign 157

Highlights: Ensign Rig 157 w/ FlexGen® SSG • Increased reliability – significantly reduced blackouts

• Consistent, clean power – frequency & voltage

• Single genset operations – 15hrs+ tripping with 1xJ320

• Increased genset loading

• Reduced drilling time – Facilitated drilling well #2 on

time despite other equip challenges

• Fuel savings of 8.9% with FlexGen® SSG

“The FlexGen® SSG greatly assisted operations: it helped me drill faster, and we were able to push the rig harder and with fewer blackouts”

-Ensign Rig 157 Driller

26 26

Executive Summary

Summary 9/29 – 10/5 – Well prep; depth reached 2500 ft. 10/1 – 10/5 – BOP maintenance held up drilling 10/6 – 10/10 – Drilling ; Depth reached 11000 ft. 10/10 Trip out – Bit change – Trip in Operated with single generator 10/11 – 10/13 Drilling; Depth reached 12600 ft. 10/13 – Trip out – Mud pump maintenance – Trip in Operated with single generator 10/14 – Drilling; depth reached 13400 ft.

27 27

Bit depth during Ensign Well #2 (Sep 29 – Oct 14, 2014)

28 28

Transient Response: Reliability

29 29

Transient Response: Reliability

Gen 2 off for 8 hrs (Tripping) Gen # 2 turned off Gen # 2 turned off

Gen Power (kW)

SSG Power (kW) Gen + SSG during Tripping (kW)

Gen 1 Gen 2

30 30

Transient Response: Tripping (1 Gen)

Voltage & Frequency safely regulated via FlexGen® SSG V

Hz

31 31

Voltage/Frequency Regulation: Tripping (1 Gen)

FlexGen® SSG shifts gensets to higher load factors

Gen 1 & Gen 2 Load Factor

32 32

Load Factor: Drilling & Tripping

FlexGen® SSG charging / absorbing 220kW for ~45 secs

FlexGen® SSG charging / absorbing 600kW for ~20 secs

kW

V

Hz

kW

V

Hz

33 33

Over-speed Protection & Blackout Prevention

34

Customers/Partners/Press

Natural Gas Comparison Diesel Comparison

Generator #1 G3516B - NG G3516B - SSG Total Runtime (days) 29.51 29.51 ekW Rating 1300 1300 Runtime (hours) 705.38 365.73 Total Output (kWh) 218479.69 218926.38 Average Output (kW) 321.69 605.6477778 Peak Output (kW) 1039.99 1040 Fuel Used (MCF) 2993.47 2566.68 Fuel Cost ($) 65856.21 56467.01 Generator #2 G3516B – NG G3516B – SSG ekW Rating 1300 1300 Runtime (hours) 627.26 352.99 Total Output (kWh) 200309.42 199453.89 Average Output (kW) 338.1111111 568.2144444 Peak Output (kW) 1002.5 1040 Fuel Used (MCF) 2718.43 2361.59 Fuel Cost ($) 59805.4 51954.81

Generator #1 3512C- Diesel 3512C - SSG Total Runtime (days) 29.51 29.51 ekW Rating 1055 1055 Runtime (hours) 705.38 258.07 Total Output (kWh) 188596.98 143444.34 Average Output (kW) 262.9888889 550.0688889 Peak Output (kW) 844 844 Fuel Used (Gal.) 13886.94 9462.04 Fuel Cost ($) 57769.67 39362.1 Generator #2 3512C – Diesel 3512C – SSG ekW Rating 1055 1055 Runtime (hours) 633.56 290.93 Total Output (kWh) 173331.2 150734.12 Average Output (kW) 270.9588889 521.7 Peak Output (kW) 844 844 Fuel Used (Gal.) 12694.68 10012.05 Fuel Cost ($) 52809.87 41650.12

No SSG SSG Enabled No SSG SSG Enabled

35

Solution: FlexGen® Solid State Generator

Alternator Radiator Control Engine SSG

Retrofitted SSG Fully-Optimized SSG Set

Capital Cost •10-30% lower cost •Fewer, smaller gensets •Downstream rotating equipment downsizing

•20-40% lower cost •Shared cooling, sheet metal, scale manufacturing efficiencies

Fuel •15-35% savings •Fewer, smaller gensets at higher average load

•20-40% savings •Optimized genset control for transients

Maintenance •10-25% savings •Fewer, smaller gensets at higher average load •No block loading

•15-35% savings •Continuous vs. prime power maintenance savings (oil, turbos, starters, filters, emissions hardware)

Emissions •10-15% savings •Fewer, smaller gensets at higher average load •No block loading

•15-25% savings •Optimized emissions controls for transients

Physical •Difficult for offshore, marine applications •Decreased overall genset mass & volume for given power rating

Potential Genset Savings

•NA •Cooling, alternator sizing,(lower Var), fuel injection, emissions treatment, starter battery, hp/RPM tradeoff (gearbox), VSG, weight & dimensions

36

Retrofitted SSG vs. OEM Integrated SSG