Taking a Proactive Approachto Water Recycling in the Barnett ShaleJay EwingFort Worth Business PressBarnett Shale SymposiumFebruary 29, 2008Outline•Devon overview and current activity•Overview of two waste waters in the Barnett•Devon’s proactive approach to water recycling•Future activity in water recyclingDevon Energy OverviewWho We Are andCurrent ActivityNYSE: DVNwww.devonenergy.compage 4Oil and gas exploration and production companyLeading U.S.-based independent gas producerAmong the largest natural gas processorsActively involved in strategic acquisitionsWho We AreNYSE: DVNwww.devonenergy.compage 5Larger Than You Might Think...Enterprise Value$0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50Southwest AirlinesGapStarbucksMarriottNikeFedExHaliburtonAnheuser-BuschUS$, BillionsSource:Enterprise Value as stated on Yahoo!Key statistics on February 6, 2008.NYSE: DVNwww.devonenergy.compage 6Devon’s Worldwide OperationsCANADACHINABRAZILGULF OF MEXICOU.S. ONSHOREAZERBAIJANQ4 '07 Production8%58%25%9%U.S OnshoreCanadaInternationalGulfNYSE: DVNwww.devonenergy.compage 7North America Onshore PositionOKTXNMWYMTLargest U.S.-based independent producerNet acreage:≈8,111,0002008 plans: Drill≈740 wells2ndLargest independent gas producerNet acreage:≈1,145,0002008 plans: Drill≈50 wellsNet acreage:≈623,0002008 plans: Drill≈230 wellsLargest independent gas producer3rdLargest independent oil producerNet acreage:≈316,0002008 plans: Drill≈125 wellsNet acreage:≈295,0002008 plans: Drill≈175 wellsLargest independent gas producerNet acreage:≈1,863,0002008 plans: Drill≈800 wellsAlberta /B.C.MontanaWyomingNew MexicoOklahomaTexasMajor player throughout western U.S. and CanadaAlbertaB.C.NYSE: DVNwww.devonenergy.compage 8Current Activity in Fort WorthBasin DrillingProducing wells:≈3,200 wells2005 activity: Drilled 268 wells2006 activity: Drilled 383 wells2007 activity: Drilled 522 wells2008 activity: Project 600 wellsDevon’s activity accounts forapproximately 25% of the totaldrilling activity in the Barnett Shale.NYSE: DVNwww.devonenergy.compage 9Current Activity in Fort WorthBasin FracturingWorking interest: 60%1st production: July 2007To reach 50 MBOED gross in 2008B R A Z I L•Each horizontal well is initially fractured in 4-6 stages•Devon currently conducts about 200 hydraulic fracturingstages per month on 50 wells•Approximately 3.5 million gallons of fresh water are requiredper wellNYSE: DVNwww.devonenergy.compage 10Trifecta FracJohnson CountyTwo Different Waste Waters inthe Barnett ShaleOverviewNYSE: DVNwww.devonenergy.compage 12Flow-back vs. Produced WaterFlow-back Water•Water recovered immediatelyfollowing the fracturestimulation of the Barnett•Chloride content begins nearzero then rises to 40-50,000ppm•20-30% of the volume pumpedduring frac is recovered infirst 2-3 weeks following thefrac•Devon is recycling 90-100% ofthe flow-back water recoveredNYSE: DVNwww.devonenergy.compage 13Flow-back vs. Produced WaterProduced Water•Water pre-existing in theBarnett or the formationbelow, Ellenberger•Chloride content 60,000 to100,000 ppm•Some amount of water isproduced for life of the well•Amount produced varies witheach well from near zero to400-500 bbls/day•Disposed by re-injecting intothe Ellenberger formationEllenbergerBarnett ShaleDevon’s Proactive Approach toWater RecyclingNYSE: DVNwww.devonenergy.compage 15Devon: Proactive Approach toWater Recycling•Piloted two technologies:—Mobile heated distillationsystem—Sequential filtration/reverse osmosis•Actively participates in aBarnett Shale industry group:—Barnett Shale WaterConservation andManagement CommitteeEllenbergerBarnett ShaleNYSE: DVNwww.devonenergy.compage 16Mobile Heated Distillation System(NOMAD)•Technology approved by theRailroad Commission of Texasin 2005•Implemented in 2005 inpartnership with FountainQuail Water Management•Vaporizes the frac flow-backwastewater and condenses itinto clean, distilled water•Remaining concentrated waterremoved for disposal orutilized for controllingpressures in another wellcompletion as a “kill fluid”EllenbergerBarnett ShaleNYSE: DVNwww.devonenergy.compage 17NOMAD Water Distillation UnitNYSE: DVNwww.devonenergy.compage 18NOMAD Water RecyclingLocationsDevon currently has 9 NOMADunits operating at four (4)strategic locations:•Blakely (SW Denton Co.)•Johnson Ranch (E Wise Co.)•Godley (W Johnson Co.)•Circle R (W Johnson Co.)WiseDentonParkerTarrantHoodJohnsonNYSE: DVNwww.devonenergy.compage 19Johnson County SiteNYSE: DVNwww.devonenergy.compage 20NOMAD Water Recycling Results•5 million barrels processed(210 million gallons) processed•4 million barrels of distilledwater generated•50 wells fraced with recycledwaterEllenbergerBarnett ShaleNYSE: DVNwww.devonenergy.compage 21Sequential FiltrationReverse Osmosis•Approved for pilot program bythe Railroad Commission ofTexas in 2006•Tested two systems in 2007•Limited capability at this time•Low efficiency•Further testing requiredEllenbergerBarnett ShaleNYSE: DVNwww.devonenergy.compage 22Water Processed by Year7.365.4136.3653.6106.48282780204060801001201401602005 2006 2007MillionGallonsFeed WaterDistillatePercent EfficiencyNYSE: DVNwww.devonenergy.compage 23January 2008Cost & Production ReportFeed Water338,974 BblsFresh Water Produced271,179 BblsConcentrate Produced67,795 BblsEfficiency80%Total Cost of Processing $874,552Trucking Cost$491,512Concentrate Disposal$135,590Cost per BBL$4.43/BblValue of Fresh Water$366,091Net Disposal Cost$3.35/BblFuture Activity in WaterRecyclingNYSE: DVNwww.devonenergy.compage 25Barnett Shale Water Conservation andManagement Committee (BSWCMC)•Committee formed in 2006•Facilitated by Dr. Tom Hayes with the GasTechnology Institute•Comprised of 14 operators in the Barnett Shale•Meet monthly to discuss emerging technologies•Committee formed in 2006•Facilitated by Dr. Tom Hayes, GTI•Comprised of 14 operators in the Barnett Shale•Meet monthly to discuss emerging technologiesNYSE: DVNwww.devonenergy.compage 26BSWCMC Activities•Reviewed presentations on six recycling technologies•Reviewed presentations from Tarrant Regional Water Districtand Brazos River Authority on water availability•Completed industry water use survey for submission to TexasWater Development Board for study completed in 2007•Facilitated fracturing expert panel focused on water qualitiesrequired for completing a successful Barnett fracNYSE: DVNwww.devonenergy.compage 27BSWCMC Activities•Submitting proposal to Research Partnership to Secure Energyfor America (RPSEA) for assistance in future research involvingthe following participants:—University of Texas—Bureau of Economic Geology—Illinois Institute of Technology—Texerra—GeoPure/Texas A&M—Gas Technology InstituteConclusionsNYSE: DVNwww.devonenergy.compage 29Conclusions•Conservation, recycling and reuse of water continue to be topof mind in the Barnett Shale region•The ability to recycle “flow-back” has increased dramaticallyin a very short time through a proactive approach by companieslike Devon and Fountain Quail•As current technologies advance and future technologiesemerge, the opportunities are unlimited for gas producers tolead the way in effective stewardship of our region’s mostvaluable resourcesThank You.