Texas Natural Gas Summit: Drilling Rig Natural Gas Technology

Todd Fox Vice President Projects, Support, & Performance October 23, 2014

544 LAND WORKOVER RIGS

7 JACKUPS – 5 Drilling – 2 Workover

496 LAND DRILLING RIGS

1 BARGE RIG 36 PLATFORM RIGS – 18 Workover/Re-Drilling – 18 Drilling

Worldwide Rig Fleet Status Actively Marketed Rigs Only As of June 30, 2014

US Drilling Group

Actively Marketed Rigs As of Sept 8, 2014

79

25

10

28

30 13 48

12

29

8

13

4

HSE – Mission to Zero Incidents

18.4

M

9.5M

12.3

M

14.8

M

14.7

M

15.6

M

11.6

M

2.07 1.92

1.70 1.54

1.22 1.09

1.05

4.11

3.07

3.44

2.87

1.97

1.60 1.47

0.25 0.19 0.13 0.27 0.08 0.10 0.09

0.0M

2.0M

4.0M

6.0M

8.0M

10.0M

12.0M

14.0M

16.0M

18.0M

20.0M

0

0.5

1

1.5

2

2.5

3

3.5

4

4.520

08

2009

2010

2011

2012

2013

Aug

-14

Labor-Hours Incident Rate

Nabors Drilling Labor Hours Nabors Drilling Incident RateIADC Incident Rate Nabors Drilling LTI Rate

NABORS US DRILLING SAFETY PERFORMANCE

2008 – August 2014

5

Safety & Drilling Efficiency Gains Continue

6

7

Drilling Rig Natural Gas Technology Overview

A transition to alternative fuel- currently two methods for rigs:

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1. Dual Fuel- add-on to existing engines, 61 rig installations to date. 2. 100% Natural Gas- new engines, 2 rig installations to date (2013).

Natural Gas Supply- 4 current methods

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1. Wellhead Gas 2. Pipeline Gas

3. LNG- Liquified

Natural Gas

4. CNG- Compressed Natural Gas

Push Back to Natural Gas

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> Supply concerns due to lack of reliable infrastructure.

> Safety concerns. > Few first adopters.

> Concerns regarding return on

investment.

> Technology and rig performance barriers.

> Lack of training and technical expertise on natural gas engines.

Natural Gas Safety

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Gas Flow rate is 3300 scfh (max), 15-50 psi.

Gas Flow rate is 73 scfh (max), 3/8 psi max.

Natural Gas Safety- your home

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> Safety Features*:

– Gas Control device (thermostat) – Air/Fuel shut-off device built into

thermostat – Temperature and pressure relief

valve (water) – Flame arrestor plate – Vent hood to atmosphere – Manual shut off valve

* Source: Home Depot online manual for Rheem 75 gal hot water heater.

Natural Gas Safety- drilling rigs

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Natural Gas Safety- drilling rigs

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Gas Detector Gas Supply Line at Power House

Gas Detector Gas Supply Line at Edge of Location

Gas Detector Middle of #1 Generator

Gas Detector Front of #3 Generator

Gas Detector Scrubber Skid and Alert Systems Panel

Gas Supply Line at Power House Gas Detector

Flame Detector above each Generator Set at 190 F.

Engine flame and gas detection systems

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Scrubber Skid

Rig Manager’s Quarters

Engine Fire and Gas Detection Panel

Remote Emergency Shutdown (ESD) switches

Driller’s Cabin

Engine House

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Economics

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> Primary business driver today for the drilling contractor is increased rig marketability.

> Dual Fuel System savings can be up to 70% yet currently

average 40%.

Economics

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> Current dual fuel rigs diesel consumption drops by approx. 1,000 gpd.

> DGE (Diesel Gas Equivalent) pricing of natural gas is roughly $2.10-$2.50* per gallon.

*Unofficial estimate

Forecast for the future (subject to change!)

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> LNG facilities will become more prevalent, starting with the larger plays- Eagleford and Bakken.

> Frac spreads and trucking fleets

will drive the conversion due to better economics. Drilling rigs will benefit as a result due to improved supply chain.

> Engine technology will improve,

dual fuel will become a standard feature if the natural gas price remains low.

Forecast for the future (subject to change!)

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> Substitution rates will improve

as the OEM’s enter the market. > As LNG facilities become more

prevalent, 100% natural gas engine rigs will become more prevalent.

> Energy storage systems will

enter the market and improve the economics of 100% natural gas engines as well as dual fuel.

Questions?

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