INNOVATIVE NANOPARTICLE TECHNOLOGY

CONFIDENTIAL

A Canadian Technology Company

– Commercializing a leading edge Nanoparticle (NP) Technology Platform

– 4 filed patent applications

Target Market: Chemical additives for Oil & Gas drilling fluid

nForcerTM – nFluids’ 1st commercial product

– Improves packing, produces a thinner, stronger, smoother and less permeable filter cake1

– Seals micro-fractures and creates pressure barrier preventing further formation breakdown

– Fills in surface roughness, reduces asperity and keeps moisture out

– Reduces oil on cuttings

Integrated Solution - 4 Cost Saving Benefits:

Other potential applications: lubricants, catalysts, re-fracking, cements, composites, electronics,

medical devices, ferromagnetic fluids, surface coatings, etc.

nFluids Explained

2

1. Jiao, D. & Sharma, M. “Mechanism of Cake

Buildup in Crossflow Filtration of Colloidal

Suspensions.” Journal of Colloid and

Interface Science, 162, 454–462, (1994).

Drilling Fluid

Loss Reduction

Wellbore Strengthening Lubrication /

Friction Reduction

Oil on Cuttings

Reduction

CONFIDENTIAL

Drilling Challenge nFluids Benefit Potential Cost Savings

Costly drilling fluid losses

• Thinner, stronger filter cake

Resulting in:

30 – 90% reduction in drilling fluid

loss

• Less formation damage

• Reduced rig downtime

• Typical well 3,500 m3, 3-5 m3 lost / 100 m

drilled

• Assume HPHT FLR = 60%

• Drilling fluid cost: $1,000-1,500 m3 (WTI $80+

/bbl)

• Drilling fluid cost: $700 (WTI $30-40 /bbl)

Potential cost savings: $45-150k per well

Weakened wellbore while

drilling

• Strengthened core, increase in

fracture pressure resistance up to

60%

Resulting in:

• Reduction of rig downtime

Potential Cost Savings: $42k per/day

Increase ROP and Hz reach

• Enhanced lubrication up to 50%

reduction in friction (metal-on-

metal)

Resulting in:

• Faster drilling and longer reach

Potential Cost Savings: $42k per/day

Improve environmental

performance

• 10-15% reduction of oil on cuttings

Resulting in:

• Less trucking , remediation &

disposal costs

• Drilling fluid losses to cuttings: 10 m3 per well

Potential cost saving per well = $10k - $15k

Drilling Challenges & the nFluids Benefit

3

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nFluids Nanoparticles

4

Synthesized calcium- and iron-based NPs (CNP and INP)

Patented bottom-up process, successfully scaled to 1,000 kg per batch

Compatible with all types of mud systems and additives

Readily dispersed in oil or water under low shear conditions

Effective at a low concentration (0.5 wt%)

Non-reactive, non-toxic, aerosol-free, non-polluting & acid-soluble

60 wt% INP20 wt% INP in carrier oil 0.5 wt% INP in mineral oil

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NPs Characterization

5

Figure 8 High-resolution STEM images of INP. 60,000x magnification (left) and 450,000x magnification (right). Hitachi S5500

operating at 30 kV. Holey carbon grids.

INP: 3.6 ± 0.6 nm

CNP: 50 ± 5 nm

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Lab Results – HPHT Fluid Loss176-300 °F, 500 psi, paper or 12 μm disk

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-65%

-63%

-45%

-72%

0

2

4

6

8

10

12

14

16

18

Diesel OBM 1 Diesel OBM 2 Diesel OBM 3 Mineral OBM 1

AP

I F

iltra

te V

olu

me

at 3

0 m

in (m

L×

2)

Control 0.5 wt% nForcer™

90/10

1050 kg/m3

78/22

1350 kg/m3

80/20

920 kg/m3

80/20

1500 kg/m3

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Lab Results – LubricityOFI Lubricity Tester, 60 rpm, 150 lbf·in

7

-48%

-31%

-26%

-15%

0

1

2

3

4

5

6

7

Diesel OBM 1 Diesel OBM 3 Mineral OBM 2 Diesel OBM 7

Coe

ffic

ien

t o

f F

riction

Control 0.5 wt% nForcer™

90/10

1050 kg/m3

80/20

920 kg/m3

80/20

915 kg/m3

90/10

1060 kg/m3

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Lubricity – ObservationsOFI Lubricity Tester, 60 rpm, 150 lbf·in

8

0.05

0.06

0.07

0.08

0.09

0.1

0.11

0.12

0.13

Control 0.5 wt% nForcer™ 1.0 wt% nForcer™ Control Post-NP

Mu

d L

ub

ric

ity C

oe

ffic

ien

t

• Coefficient of friction reduced with nForcer™

• Reduction observed in subsequent control sample

• Deposition of NPs observed on the instrument

• Indicates interaction between NPs and metal surface

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Lab Results – Wellbore StrengtheningRoubidoux sandstone cores, 90/10 Diesel OBM2

9

39%

41%

55%

58%

1400

1600

1800

2000

2200

2400

2600

2800

3000

Fra

ctu

re B

rea

kd

ow

n P

ressu

re (

psi)

Control

INP 0.5%, Graphite 0.5%

INP 2.5%, Graphite 0.5%

CNP 0.5%, Graphite 2%

CNP 2.5%, Graphite 2%

CONTROL CORE FRACTURE

BREAKDOWN PRESSURE, Pfb1

FRACTURE

BREAKDOWN PRESSURE

WITH ADDITIVE, Pfb1

2. Contreras, O.; Hareland, G.; Husein, M.; Nygaard, R.

& Alsaba, M. “Wellbore Strengthening in Sandstones

by Means of Nanoparticle-Based Drilling Fluids.” SPE

Deepwater Drilling and Completions Conference,

Galveston, Texas, 10-11 September (2014). SPE-

170263-MS.

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Wellbore Strengthening – ObservationsCatoosa shale cores, 0.5 wt% CNP, SEM

10

At fracture end:

At fracture mouth:

Shale core showing two

vertical fractures3

NPs form a continuous seal along the fracture3 3. Contreras, O.; Hareland, G.; Husein, M.; Nygaard, R.

& Alsaba, M. “Experimental Investigation on Wellbore

Strengthening in Shales by Means of Nanoparticle-

Based Drilling Fluids.” SPE Annual Technical

Conference and Exhibition, Amsterdam, The

Netherlands, 27-29 October (2014). SPE-170589-MS.

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Field Testing – Overview

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9 total tests completed in Alberta– 6 field tests completed4 near RMH

1st gen nForcer™ (CNP) at 0.5 wt%

12 offset wells for comparison

Horizontal wells, ~4,000 m TD

Shale and coal zones in build section

Cardium sandstone pay zone

Focus on mud loss reduction

Cutter-D 90/10 to 85/15 OBM system

Mud weight: 1,030 to 1,150 kg/m3 (361 to 403 lb/bbl)

Group D – different lithology, no offset data, not shown herein

4. Borisov, A. S.; Husein, M. & Hareland, G. “A Field

Application of Nanoparticle-based Invert Emulsion Drilling

Fluids.” Journal of Nanoparticle Research, 17, 340, (2015).

CONFIDENTIAL

Field Results – Total Mud Losses1st gen nForcer™ (CNP) 0.5 wt%

12

-29% -24%-28%

-21%

0

10

20

30

40

50

60

70

80

90

Control A Test A Control B Test B1 Test B2 Control C Test C

To

tal M

ud

Lo

sse

s a

t T

D, m

3

NOTE: Total mud losses include final surface and subsurface losses calculated between surface casing and TD

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Field Results – Total Mud Losses1st gen nForcer™ (CNP) 0.5 wt%

13

-34%

-29%

-30%

-23%

0

0.5

1

1.5

2

2.5

3

3.5

Control A Test A Control B Test B1 Test B2 Control C Test C

Ave

rage

Mu

d L

osse

s p

er

10

0 m

Drille

d,

m3

/ 1

00

mNOTE: Average mud losses per 100 m drilled account for variations in TD between wells - final mud losses at TD

divided by the interval drilled and multiplied by 100

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nFluids Technology Summary

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nFluids nanoparticle (NPs) products: – Iron-based nanoparticle (INP)

– Calcium-based nanoparticle (CNP)

Lab work focusses on three properties of drilling fluids: – Fluid loss reduction (HTHP with paper and ceramic disks)

– Inhibited pressure communication in the formation (sandstone, shale, and cement core fracturing)

– Lubrication (OFI metal-on-metal lubricity tester)

Fracture pressure lab tests: – Up to 60% increase in fracture initiation pressure in sandstone cores with CNP (Diesel OBM)

– Up to 40% increase in fracture initiation pressure in sandstone cores with INP (Diesel OBM)

Lubricity lab tests: – Up to 37% reduction in coefficient of friction with CNP (metal-on-metal, Diesel OBM)

– Up to 48% reduction in coefficient of friction with INP (metal-on-metal, Diesel OBM)

Recent field tests:– Six full-scale field tests completed in Alberta (RMH) in 2015

– Up to 30% reduction in mud volume losses while drilling with CNP

– Field results consistent with lab HPHT observations

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Formation Damage Prevention

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Reduced filter cake thickness and permeability– HPHT/LPLT fluid loss tests, WBM and OBM, 0.5 wt% INP

Acid-soluble product

– Soluble in 10% HCl

Shallow depth of penetration

– From SEM and EDX experiments on filter cakes

Up to 90% reduction in spurt loss– WBM formulation, LPLT fluid loss, 0.5 wt% INP

Up to 55% reduction in 30 min fluid loss– WBM formulation, LPLT fluid loss, 0.5 wt% INP

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O&G Production Applications

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Fracturing/Re-Fracturing:

– Creating a pressure barrier that prevents further formation breakdown (permeability reduction)

– Mono-bore design

Conformance control:

– Creating a fluid barrier via permeability reduction would improve conformity of the flood front in EOR

Cementing:

– Reducing the permeability, increasing the strength and improving the bond with metal & rock

Lubrication:

– Drilling-Coil Tubing

– Coatings

Wellbore Integrity:

– Reducing the permeability and increasing the strength of shale zones etc.

Corrosion Control:

– Nanoparticles can be capped with hydrophobic materials-preventing water from migrating into the asperities of the material

Oil & Water treatment:

– Utilizing magnetic nanoparticles to remove oil from water bodies & solid materials

– Removal of Arsenic etc.

www.nfluids.com

Jeffrey Forsyth, CEO jforsyth@nfluids.com

Jeremy Krol, VP jkrol@nfluids.com

Alex Borisov, R&D aborisov@nfluids.com

Hai Wang, R&D hwang@nfluids.com

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APPENDIX

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Filter Cake With and Without NPs: SEM Characterization

Filter cakes produced by HPHT fluid loss test at 250 °F

Cryo-SEM performed on the profile

Control OBM shows many cracks and fractures that form filtrate flow channels

OBM with INP do not contain any visible fractures – consistent with reduction of filtrate volume

19

Control OBM OBM with 0.5 wt% INP

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Wellbore Strengthening – Roubidoux Sandstone

20

Graphite, INP and CNP at

different concentrations were

added to OBM to study their

effect on the fracture

breakdown pressure, Pfb1

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Wellbore Strengthening – Sandstone2 – Diesel OBM

21

2. Contreras, O.; Hareland, G.; Husein, M.; Nygaard, R.

& Alsaba, M. “Wellbore Strengthening in Sandstones

by Means of Nanoparticle-Based Drilling Fluids.” SPE

Deepwater Drilling and Completions Conference,

Galveston, Texas, 10-11 September (2014). SPE-

170263-MS.

CONFIDENTIAL

Wellbore Strengthening – Catoosa shale

22

Graphite, INP and CNP at

different concentrations were

added to OBM to study their

effect on the fracture

reopening pressure, Pfb2

CONFIDENTIAL

Wellbore Strengthening – Catoosa shale

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0

100

200

300

400

500

600

700

800

0 10 20 30 40 50 60

Pre

ss

ure

, p

si

Time, min

Effect of CNP and INP on Fracturing Pressure in Shale Cores

Control CNP 0.5wt%+Graph 2wt%CNP 2.5wt%+Graph 2wt% INP 0.5wt%+Graph 0.5wt%INP 2.5wt%+Graph 0.5wt%

27%

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Wellbore Strengthening – Shale3 – Diesel OBM

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3. Contreras, O.; Hareland, G.; Husein, M.;

Nygaard, R. & Alsaba, M. “Experimental

Investigation on Wellbore Strengthening in

Shales by Means of Nanoparticle-Based

Drilling Fluids.” SPE Annual Technical

Conference and Exhibition, Amsterdam, The

Netherlands, 27-29 October (2014). SPE-

170589-MS.