01-014 Mannville Horizontal NGC Project (Final)

Innovative Energy Technologies Program
Project Annual Report Requirements

Quicksilver Resources Canada Inc. (QRCI)
QRCI Mannville Horizontal NGC Project

207 Report - Submitted June 27, 2008
1.
Summary: Project status report, including a chronological report of all activities and operations conducted,
and updated incremental reserves and production.
QRCIs original plan, as outlined in its IETP application dated March 29 of 2005, was to drill up to 5
horizontal Manville wells in 2005, 12 in 2006 and 40 in 2007. In fact, QRCI drilled 2 horizontal Mannville
wells in 2005, 2 more in 2006 and drilled 5 additional horizontal wells in 2007.
The chronology of activities and operations conducted to date on the 2 wells drilled in 2005 is as follows:
100/01-11-047-24W4 - Wetaskiwin
2005/06/21 Spud
2005/07/09 Rig Release
2005/07/17 Equipped
2005/07/18 Completed
2005/07/20 On Production
2006/01/29 Cleanout
2006/06/22 Surgi Frac
2006/09/06-2007/07/16- pulled down-hole equipment 5 times in this period to change bottom-hole
insert pump. Pump was sanding off because of re-frac sand migration.
2007/07/17-2007/08/08- Performed 2 coil cleanouts in this period
2007/08/01-2008/03/16- Replaced bottom-hole Insert pump 6 times in this period
100/13-04-048-21W4 Bittern Lake
2005/07/11 Spud
2005/08/26 Equipped
2006/03/29 Wax Cleanout Workover
2006/11/08 Pump Change-(bottom-hole Insert pump change)
2007/09/23 Pump Change-(bottom-hole Insert pump change)
2008/02/14 Shut-in due to directive 60 (enough data gathered)
100/01-20-044-22W4 New Norway
2006/06/25 Spud
2007/06/07 Pull Equipment
2007/06/10 Re-Frac well
2007/06/17 Equipped- (re-run down-hole equipment, (2-3/8 tubing, 5 gas lift mandrels, and
packer)).
2008/02/07 Cleanout
102/01-29-045-22W4 New Norway
2006/07/15 Spud
2006/12/18 Equipped- (re-run down-hole equipment, (2-3/8 tubing, 5 gas lift mandrels, and packer).
102/08-20-044-22W4 New Norway (currently listed by ERCB as 102/01-20)
2007/08/16
2007/09/06
2007/12/20
2007/12/20
2008/01/23
Spud
Rig Release
Installed gas lift and equipment
Completed
On Production
Please note that the well in New Norway with bottom hole at 102/08-20-044-22W4 was licensed and is still
listed by ERCB as 102/01-20-044-22W4. This has been noted consistently throughout this report.
100/03-28-045-22W4 New Norway
2007/06/18 Spud
2007/10/17 Installed gas lift and equipment
100/02-29-045-22W4 New Norway
2007/08/02 Spud
2007/11/20 Installed gas lift and equipment
100/01-18-046-24W4 Wetaskiwin
2007/03/01 Spud
2007/08/26 Installed pump jack and equipment
2007/10/30-2008/02/07- Replaced bottom-hole pump 3 times in this period
2008/01/09 Coil cleanout
102/03-20-046-24W4 Wetaskiwin
2007/07/05 Spud
2007/12/07 Installed pump jack and equipment
2008/03/10-Current- ERCB wanted shut-in due to no control well
Please note that the well in New Norway with bottom hole at 100/03-20-046-24W4 was licensed as 100/0120-046-24W4. It has recently been corrected to 100/03-20 by the ERCB. This has been noted consistently
throughout this report.
QRCI has not yet booked any reserves from this project.
2.
Pilot data
a. Data submission.
i.
Geology and Geophysical data.
In 2007, QRCI drilled 2 wells in a new area, Wetaskiwin, which had been identified as a priority
through QRCIs prior geological\ geophysical initiatives, and twined 2 of its existing wells at
New Norway (one with one twin and the other with 2). The twin wells did not add any
significant new learnings from a geological perspective. The 1-18-46-24 well did show that a
location that we would not have picked using geological criteria still did OK. After 9 wells
drilled, we are not convinced that the data we have available to use to choose locations is
sufficient to predict which wells/areas will be successful.
ii.
Laboratory studies.
N/A
iii.
Simulations.
Nothing to add since our last submission.
iv.
Pressure, temperature, and other applicable reservoir data.

Nothing to add since our last submission.
v.
Any other measurements, observations, tests or data pertinent to the pilot.

N/A
b.
Interpretation of pilot data.

QRCI has developed a calibrated reservoir simulation model for the Mannville coals based on
available geological, core and petrophysical data, and production performance from wells in our pilot
area, as well as additional Mannville wells operated by QRCI and others. Our primary objective in
developing this calibrated model was to estimate the bulk permeability of the Mannville coals. Our
simulation analysis suggests that permeability in the Mannville coals ranges from less than 1.0 mD to
about 20 mD, with a typical value being about 5.0 mD. We used the results from this simulation
calibration process as the basis for making our predictions of how a Mannville horizontal well would
perform given all the observations and interpreted reservoir conditions derived from vertical Mannville
wells. The plots indicate the permeability is not what we expected. It is not clear whether this is due to
wellbore damage or if the inherent rock perm is different than predicted.
3.
Well information
a. Well layout map.
See Appendix 3 a for a map indicating the layout of the wells.
b.
Review drilling, completion and workover operations and any difficulties encountered.
The Drilling plan consisted of setting surface casing down to 215 m. Setting 7" Intermediate casing HZ
in the Mannville coal. QRCI dropped off a 4.5" slotted liner in the 156 mm HZ hole. We then set a
whipstock assembly in the 7" intermediate and milled out the 7" intermediate casing where we drilled
the sump liner hole. QRCI dropped off a 5.5" flush joint liner in the 156 mm open hole.
In June 2006 QRCI contracted Halliburton to conduct a Surgifrac treatment on the Wetaskiwin 1-11
horizontal well. The objective of the treatment was to improve permeability by fracing the horizontal
section at 10 different positions along the wellbore and place 60 tonnes of proppant. The treatment was
performed and the well was placed back on test to flare.
The down hole pumping equipment has failed twice since the treatment was performed due to frac
sand in the pump and we have had to perform 5 bottom hole equipment changes as the result of frac
sand inflow plugging the bottom-hole pump. A coiled tubing cleanout is scheduled for the well as soon
as road bans are lifted.
No additional treatments have been performed on the Bittern Lake 13-4 well since the last report.
Drilling of 100/01-20-44-22
Surface hole was drilled to 222mMD, cased and cemented without problems. Drilled intermediate hole
tp 887mMD and kicked off directionally. Build section was drilled with Floc water to 1075mMD.
Mudded up to a Gypsum based drill fluid and drilled the remainder of the intermediate to 1721mMD =
1321mTVD. Problems were encountered finding the Mannville coal which in turn caused for a longer
than expected intermediate section of the hole. Intermediate hole was cased into the Mannville at 90
deg with 177.8mm casing and cemented in full length. The lateral section of the hole was drilled with a
159mm bit utilizing Schlumbergers Powerdrive RSS/Periscope. The Periscope system allowed us to
stay in our thin coal seam by predicting where our upper and lower boundaries were. We reduced our
drill time in the lateral by 50% (2.5 days vs 5 days in 2005) and maintained access in the coal seam
95% of the time. Previous wells drilled in 2005 could only stay in the coal seam 45-50% of the time.
The lateral section was drilled to a TD of 2720mMD = 1322mTVD. Instead of using weighted brine
(1230kg/m3) the entire lateral was drilled with produced Mannville water (1010kg/m3). A total of
550m3 of fluid was lost while drilling the lateral section. The lateral section was cased with 114.3mm
casing and cemented with acid soluable cement.
Drilling of 102/01-29-45-22
Surface hole was drilled to 220mMD, cased and cemented without problems. Drilled intermediate hole
tp 880mMD and kicked off directionally. Build section was drilled with Floc water to 1100mMD.
Mudded up to a Gypsum based drill fluid and drilled the remainder of the intermediate to 1410mMD =
1237mTVD. Intermediate hole was cased into the Mannville at 90 deg with 177.8mm casing and
cemented in full length. The lateral section of the hole was drilled with a 159mm bit utilizing
Schlumbergers Powerdrive RSS/Periscope. The Periscope system allowed us to stay in our thin coal
seam by predicting where our upper and lower boundaries were. We reduced our drill time in the
lateral by 50% (2.5 days vs 5 days in 2005) and maintained access in the coal seam 99% of the time.
Previous wells drilled in 2005 could only stay in the coal seam 45-50% of the time. The lateral section
was drilled to a TD of 2585mMD = 1243mTVD. Instead of using weighted brine (1230kg/m3) the
entire lateral was drilled with produced Mannville water (1010kg/m3). A total of 172m3 of fluid was
lost while drilling the lateral section. The lateral section was cased with 114.3mm casing and cemented
with acid soluble cement.
Initial completion operations were conducted on New Norway 100/ 1-20 and New Norway 102/1-29 in
July and August 2006. The Initial completion on these wells involved dividing the horizontal wellbore
into sections and perforating, stimulating and evaluating each section individually. Perforating guns
were either conveyed to their position with a well tractor or run on jointed tubing. Sections of the well
were isolated by a composite bridge plug after they were evaluated and then the bridge plugs were
drilled out previous to putting the well on production. A number of stimulation techniques were
performed on the wells including, pumping a gelled water frac with proppant down casing, pumping a
nitrogen frac down casing with perf balls to divert flow, and fracing each set of perforations
individually with nitrogen pumped down coiled tubing. Both wells were equipped with gas lift
mandrels for production.
In June of 2007 a produced water re-frac was performed on New Norway 100/1-20. Initially the
treatment was attempted to be pumped down coiled tubing but high break down and friction pressures
dictated that the job be pumped down the casing. Filtered Mannville produced water and proppant was
used for this treatment, there were no chemicals added. The well is now back on production for
evaluation.
Five wells were completed in the remainder of 2007. Each well had a liner in the horizontal section.
The liner was cement in place on four of the five wells, the fifth had a liner in place but it was not
cemented due to technical difficulties. The completion of each well varied mainly because of the
quality of the cement surrounding the horizontal liner. A discussion of each completion follows.
102/8-20-44-22W4
A 114.3mm liner was run into the well with the drilling rig with the intention of cementing it in place
however, circulation could not be established and the liner was left un-cemented. A Surgifrac treatment
was performed on this well at ten locations along the horizontal liner. 3.5 tonnes of 40/70 sand was
pumped into each location, the fluid used was Mannville produced water with friction reducer to lower
the pumping pressure down the coiled tubing. Well was equipped with gas lift mandrels to de-water
the well.
100/3-28-45-22W4
A cement bond log was run and indicated good cement from 2180m to the toe at 2650m but showed
that the cement was channelled from 2180m to the heel of the well. This well was also perforated and
stimulated in three sections. Perf guns were conveyed into the well using a well tractor, the fracs were
programmed to, and successfully placed +/- 8 tonnes of lightweight proppant in each interval. Fluid
was Mannville produced water with no gel. There was a failure at a collar in the horizontal liner during
the first frac, otherwise operations went well. The well was swab evaluated at +/- 30m3/day. Gas lift
mandrels were run to equip well for de-watering.
100/2-29-45-22W4
A cement bond log was run and indicated good cement from 1975m to the toe at 2577m but showed
that cement was channelled from 1975m to the heel. This well was perforated and stimulated in three
sections. The first two intervals were perforated using a well tractor to convey the guns to position.
The third section was tubing conveyed due to a partial obstruction in the casing that wouldnt let the
tractor pass through. The frac treatments were programmed to pump 8 tonnes of lightweight proppant
in Mannville produced water without any gel, however we were only able to place +/- 4 tonnes in each
section before we reached our pressure limitations. Well was swab tested at +/- 35m3 /day. Gas lift
mandrels were run to equip wells for de-watering.
100/1-18-46-24W4
A cement bond log was run and indicated good cement throughout the length of the horizontal section.
The well was perforated and stimulated in three sections. Tubing conveyed perforating was used in this
well with one section at a time being perforated and fraced. The frac treatments were programmed to
place 17 tonnes of 40/70 sand with Mannville produced water as a carrying medium with no gel in the
fluid. We were only able to place +/- 9 tonnes in each section before we reached our pressure
limitations. Our swab evaluation indicated a water inflow rate of +/- 40m3 /day. Well was equipped
with a sand screen and an insert pump was run on sucker rods to de-water the well.
100/3-20-46-24W4 (also known as 100/01-20)
A cement bond was run and indicated good cement from 2150m to the toe at 2450m but, very poor
cement from 2150m to the heel. The cemented section was perforated by conveying guns with a well
tractor. This section was then fraced , and, 4.7 tonnes of lightweight proppant was placed. A Surifrac
treatment was performed on the remaining un-cemented section. Ten locations were stimulated and 3.5
tonnes of 40/70 sand was placed in each interval. Friction reducer was added to lower pumping
pressures down the coiled tubing. A sand screen was run on tubing and well was equipped with a pump
and rods to de-water well.
c.
Well operation.
i.
Well list and status.
100/01-11-047-24W4/00
100/13-04-048-21W4/00
100/01-20-044-22W4/00
102/01-29-045-22W4/00
102/08-20-044-22W4/00
100/03-28-045-22W4/00
100/02-29-045-22W4/00
100/01-18-046-24W4/00
100/03-20-046-24W4/00
ii.
Producing, on production date: 20-Jul-05

Shut in, on production date: 10-Aug-05
Producing, on production date: 03-Dec-06
Producing, on production date: 23-Jan-08 (also known as 102/01-20)
Producing, on production date: 30-Aug-07
Shut in, on production date: 13-Dec-07 (also known as 100/01-20)
Wellbore schematics.
See Appendix 3 c ii
iii.
Spacing and pattern.

Wells are single-well horizontals.
Orientations are:
(A) 100/01-11-047-24W4/00 east-southeast from 12-11 to 01-11
(B) 100/01-20-044-22W4/00 southeast from 13-20 to 01-20
(C) 102/01-29-045-22W4/00 south from 16-29 to 01-29
(D) 102/08-20-044-22W4/00 southeast from 13-20 to 08-20 (also known as 102/01-20)
(E) 100/03-28-045-22W4/00 southeast from 16-29 to 03-28
(F) 100/02-29-045-22W4/00 southwest from 16-29 to 02-29
(G) 100/01-18-046-24W4/00 southeast from 14-18 to 01-18
(H) 100/03-20-046-24W4/00 south from 16-20 to 01-20 (also known as 100/01-20)
Well (D) is a twin to well (B) and wells (E) and (F) are twins to well (C).
See Appendix 3 a for a map indicating the well layout
4.
Production performance and data

a. Injection and production history on an individual well and composite basis.
100/1-11-47-24W4
Stabilized H2O production rate: 8.0 m3/day
Stabilized Gas production rate: 2.0 e3m3/day

Cumulative H2O production: 2,700 m3
Cumulative Gas production: 1,209 e3m3
100/13-4-48-21W4
Cumulative Gas production: 791 e3m3
100/1-20-44-22W4
100/1-29-45-22W4
102/08-20-44-22W4 (also known as 102/01-20)
Cumulative H2O production: 648 m3
100/03-28-045-22W4
Stabilized H2O production rate: 10 m3/day
100/02-29-045-22W4
100/01-18-046-24W4
100/03-20-046-24W4 (also known as 100/01-20)
See Appendix 4 a for production plots.
b.
Composition of produced / injected fluids.

See Appendix 4 b for gas, water, scale, and wax analyses
c.
Comparison of predicted versus actual well / pilot performance and a discussion regarding the
difference.
In its IETP application, QRCI anticipated that it would experience producing rates from the wells of up
to 500 mcf/d of gas and 800 bbl/d of water.
In fact, the wells have peaked and/or stabilized at rates significantly below significantly below
expectations based on our reservoir simulations. Please see Appendix 4 a for production plots. There
are a number of potential reasons why our horizontal wells have not meet expectations, including, but
not limited to: coal fines plugging permeability, hydrostatic pressure on formation, unsuccessful fracs.
i.
ii.
iii.
iv.
Lower-than-expected formation permeability

Near-wellbore damage caused by drilling and completion operations. Because these wells were
cased and cemented it would suggest that a certain amount of damage would have occurred with
cement invasion into the coal reservoir. Subsequently, because they were cased and cemented,
we were able to isolate different sections of the seam to fracture past any damage. It appeared
from the evaluations that the N2 fracd zones performed better than the zones that had been
fracd with polymer fluids. The productivity of the 2007 wells are similar to the 2006 wells
with no defined improvement with any of the different completion techniques. The well that is
showing the best productivity is the 100/1-18-46-24W4 well, and it showed signs of being
fractured or having high perm when it was being drilled as there was a large volume of fluid lost
to the formation.
Unidentified relative permeability effects
Wellbore hydraulics issues, resulting in a low effective lateral length
Some of these issues relate to making better a-priori location selections, assuming that we can develop
a process that can predict better formation permeability. The study performed by United attempted to
address this issue, among others. Results to date do not support the reliance upon the United study to
select locations. The remaining issues relate to the development of best practices (drilling, completion,
production), which should improve as we drill additional wells and derive key learnings from those
results. Cementing the liner and perforating gives us a better control in directing the stimulation
treatments down the whole length of the wellbore. For its 2007 horizontal Mannville activity QRCI
tested one additional region and tested the impact of twinning existing wells with 1 and 2-well twin
pilots.
d.
History of injection, production and observation well pressures and average reservoir pressure.
As a result of the constant producing casing pressure and fluid level, there appears to be little reservoir
pressure depletion at this point.
5.
Pilot economics to date

a. Sales volumes of natural gas and by-products.
Sales volumes are nil from wells drilled in 2005 as all produced gas from Wetaskiwin well 100/01-11047-24W4 is being flared and Bittern Lake well 100/13-04-048-21W4 is shut in. Wells drilled in 2006
are producing to our gathering system and are being compressed to sales. Wells drilled in 2007: New
Norway wells 102/08-20-044-22W4 (also known as 102/01-20), 100/03-28-045-22W4 and 100/02-29045-22W4 are being compressed to sales, Wetaskiwin well 100/01-18-046-24W4 is being flared and
Wetaskiwin well 100/03-20-046-24W4 (also known as 100/01-20) is shut in.
See Appendix 4 a for production plots.
b.
Capital costs (include a listing of items with installed cost greater than $10,000).
Please see attached Appendix 5 for capital and operating statement information.
c.
Direct and indirect operating costs by category (e.g. fuel, injectant costs, electricity).
d.
Crown royalties, applicable freehold royalties, and taxes.

e.
Cash flow.
f.
Cumulative project costs and net revenue.

g.
Explanation of material deviations from budgeted costs.

6.
Facilities
a. Description of major capital items (including new facilities and additions /modifications to existing
facilities).
100/1-11-47-27W4
-
912 Pump Jack system

Generator Package
2PH-860 kPa Separator (0.61m x 1.52m)
Flare Stack
2 x 400 bbl production tanks
Meter Run
2-7/8 Well head
1,270 m of 2-7/8 tubing
1,260 m rod string
2 bottom hole insert pump
100/13-4-48-21W4
-
640 Pump Jack system

2PH-860 kPa Separator (0.61m x 1.52m)
Incinerator
Meter Run
2-7/8 Well head
1,210 m of 2-7/8 tubing
1,200 m rod string
1-1/2 bottom hole insert pump
100/01-20-44-22W4
-
185 HP screw compressor

95HP reciprocating compressor
Weatherford gas lift system w/mandrels
3 x 400 bbl production tanks (at 13-20 padsite)
Meter Run
2-3/8 Well head
1,652 m of 2-3/8 tubing
102/01-29-45-22W4
-
95HP screw compressor

95HP reciprocating compressor
Meter Run
2-3/8 Well head
1,373 m of 2-3/8 tubing
102/08-20-044-22W4/00 (also known as 102/01-20)

185 HP reciprocating compressor

Schlumberger gas lift system w/mandrels
Meter Run
2-3/8 Well head
xxxx m of 2-3/8 tubing
100/03-28-045-22W4/00
-
Meter Run
2-3/8 Well head
100/02-29-045-22W4/00
-
Meter Run
2-3/8 Well head
100/01-18-046-24W4/00
VSH2 hydraulic jack

Nitrogen-over-hydraluic pumping skid
Incinerator
Meter Run
100/03-20-046-24W4/00 (also known as 100/01-20)
b.
VSH2 hydraulic jack

Nitrogen-over-hydraluic pumping skid
Incinerator
Meter Run
Capacity limitation, operational issues, and equipment integrity.

QRCI has experienced no capacity issues as of yet. Being that the two wells are not tied into a
gathering system, capacity issues such as high line pressures, line liquid loading, and compression
facility capacity are not present at this time.
The only significant operational issues encountered as of yet, were the production of down hole wax
and some forming of scale on our bottom hole pump barrel. While performing a standard pump change
with the intent of remedying what appeared to be a plugged / damaged pump, QRCI discovered that
the pump and some of the rod strings were covered in a produced waxy substance (see attached wax
analysis). To address the issue, we pulled all of our equipment of the wellbore and flushed the
horizontal leg with a chemical to breakdown and flush out the wax. The well has since been put back
on production and appears to be pumping normally.
In another case, QRCI experienced a separate inability to pump fluids. Upon retrieval of the pump on
surface, QRCI noticed that the pump failure was a result of a hole in the pump barrel. After further
equipment inspection, QRCI noticed that there was some scale present on the pump barrel as well (see
attached scale analysis).
c.
Process flow and site diagram identifying major facilities, including production equipment, connected
pipelines, gathering and compression facilities.
See Appendix 6 c for a diagram of major facilities
7.
Environment/Regulatory/Compliance
a. Summary of project regulatory requirements and compliance status.
QRCI has been and is in compliance with all project regulatory requirements.
b.
Procedures to address environmental and safety issues.

There are no known environmental or safety issues to be addressed.
c.
Plan for shut-down and environmental clean-up

There are no immediate plans to shut in any of the wells for environmental cleanup.
8.
Future operating plan

a. Project schedule update including deliverables and milestones.
QRCI has no plans to drill additional horizontal Mannville CBM wells at present. QRCI will continue
to produce existing wells to assess productive capability.
b.
Changes in pilot operation, including production operations, injection process, and cost optimization
strategies.
The operation strategy for 2007 and beyond is to continue to produce our New Norway Wells to sales
using gas lift and to flare other production where possible.
c.
Salvage update
QRCI has not yet salvaged any of the equipment from its horizontal Mannville program, nor does it
have any current salvage plans.
9.
Interpretations and Conclusions

An assessment of the overall performance of the pilot, including:
a. Lessons learned.
The results of QRCIs Mannville horizontal well program have come in below expectations relative to
our reservoir simulation models. There are a number of potential reasons why our horizontal wells
drilled through 2007 did not meet expectations, including, but not limited to:
i.
ii.
iii.
iv.
Lower-than-expected formation permeability

Unidentified relative permeability effects
Experienced some lube oil entering annulus via gas lift - solved by adding filtration.
Gas lift system limited to 100 - 150 psi bottom hole pressures.
These reasons, and/or others yet unidentified, and probably in combination, make the Mannville a
complex and difficult problem to solve. QRCI continues to address the previously identified issue the
development of best practices for drilling, completion and production that will yield the best possible
Mannville coal well.
b.
Difficulties encountered.
01-11-047-24W4
Drilling
The well was originally AFE'd for 12 days. Actual time was 18 days due to
an extra 1/2 day rigging up top drive,
numerous motor failures while drilling the intermediate hole,
10
the build section drilled much slower than expected (1 day longer),
the EUB required us to log the intermediate hole with drill pipe (lost 1 day),
top drive failures (1/2 day),
staged the cement job for intermediate section,
EM tool failures while drilling horizontal section,
longer amount of time drilling the sump section of the hole than anticipated
unplanned gyro surveys for sump section of the hole.
Completions\Operations
QRCI had to perform an unplanned chemical flush to clean out the horizontal section.
The Surgifrac treatment that was performed required considerably more fluid than was anticipated
due to the high leak-off near the heel of the well. The insert pump that we are using has been seized
twice by frac sand necessitating a pump change and a coiled tubing clean out.
13-04-048-21W4
Drilling
Well was originally AFE'd for 12 days. Actual time was 21 days due to problems encountered in the
horizontal section. Directional tools were lost as a result of getting stuck.
QRCI had to perform an unplanned chemical flush to clean out a wax build-up in the horizontal
section.
01-20-044-22W4
Drilling
Well was AFEd for 14 days but actually took 19 days. Extended days were due to the Mannville
formation coming in at a lower TVD than predicted. 3 days were spent looking for the Mannville.
Problems were also encountered after cementing the lateral section. The well was programmed so we
could rotate off the top of the lateral liner to allow our production pumping to be done from the
177.8mm casing. Because of rig problems we were unable to rotate off the Monobore Liner system to
circulate any cement from the liner top. Therefore our casing above our liner top was cemented in.
The completion operations went relatively smoothly, there were a couple of mechanical failures that
resulted in additional rig days, confirming exact coiled tubing depth in the horizontal was a challenge,
and a questionable piece of metal that was dropped in the well (possibly sabotage) that required a
fishing job.
01-29-045-22W4
Drilling
Well was AFEd for 14 days but drilled in 16 days. The only problems encountered was during the
cementing operation with the lateral liner. Because of equipment problems while cementing the cement
density was not mixed at the programmed weight. Bond log revealed it was still good cement.
Completion operations went smoothly.
102/08-20-044-22W4 (also known as 102/01-20)
Drilling
Well AFEd for 14 days, but drilled in 21days. The problem encountered was that we were not able to
run the liner in to the lateral section due to poor hole conditions caused by excessive directional
changes in the lateral section. A whipstock assembly was then run in the intermediate casing, and a
window was milled out at a depth 1513.36mMD. A side track hole was then drilled at a distance of
150m beside the original HZ hole to a depth of 2632mMD. A 4.5 liner was then run in the side track
hole to a depth of 2551mMD where the liner became stuck. We were unable to break circulation on
the liner, and therefore could not cement the liner in place.
11
Completion operations went smoothly
100/03-28-045-22W4
Drilling
Well was AFEd for 14 days but drilled in 17 days. No problems with this well.
A collar in the liner parted on our first frac, the toe section of the well is now not accessible with
tubulars.
100/02-29-045-22W4
Drilling
There is a minor obstruction in the horizontal liner that prevented the last set of guns from being
conveyed with the tractor, otherwise, completion went well.
100/01-18-046-24W4
Drilling
Completion operations went well.
100/03-20-046-24W4 (also known as 100/01-20)
Drilling
Part of the liner was un-cemented, necessitating a deviation from our typical completion technique.
The toe section was perforated and fraced down casing and the un-cemented section had a Surgifrac
performed.
c.
Technical and economic viability.

QRCIs 9 well program to date has not demonstrated sufficient technical or economic viability and
QRCI has no further drilling plans for its Mannville CBM mineral interests.
d.
Overall effect on overall gas and bitumen recovery.

Nil.
e.
Assessment of future expansion or commercial field application and discussion of reasons.

QRCI will continue to produce gas from its Horizontal Mannville CBM program where possible and
practical to evaluate potential commercial viability. QRCI currently has no plans to expand its
Horizontal Mannville CBM drilling program.
12
Appendix 3 a
Well Layout
13
Appendix 3 c ii
Well plans for the following 2007 well to follow under separate cover
102/08-20-44-22W4 (also known as 102/01-20)
100/03-28-45-22W4
100/02-29-45-22W4
100/01-18-46-24W4
100/03-20-46-24W4 (also known as 100/01-20)
14
Appendix 4a
Production Plots
Top of Sump Depth: 3,995 ft-MD
Horizontal Scetion Depth: 4,487 ft-MD
10,000
100/01-11-047-24W4 Production Chart
Back to
Summary page
5,000
Water Rate (bbls/d)

Gas Rate (Mscf/d)
Fluid Level (MD ft from Surface)
100
3,000
10
2,000
1,000
Date
15
-0
8
ay
M
5-
6-
ar
-
08
08
nJa
6-
N
ov
-0
7
-0
Se
p
8-
7-
7
-0
ul
10
-J
ay
-0
7
-M
11
12
-M
ar
-0
7
07
an
-J
11
ov
-
06
6
-S
ep
13
12
-
-0
6
-0
ul
15
-J
ay
-0
6
-M
16
17
-M
ar
-0
6
06
16
-J
an
-
05
ov
N
17
-
-S
ep
18
20
-J
ul
-0
-0
Producing Fluid Level, ft MD
4,000
Water Rate (bbls) - Gas Rate (Mscf/d)
1,000
Appendix 4a Contd
Production Plots
Top of Sump Depth: 3,707 ft-MD
Horizontal Scetion Depth: 4,149 ft-MD
Back to
Summary page
100/13-04-048-21W4 Flow Test Chart
6,000
1,000
Water Rate (bbls/d)

Gas Rate (Mscf/d)
2,000
10
Date
16
-0
8
M
ay
ar
-0
8
08
Ja
n-
7
-0
N
ov
-0
7
Se
p
7
l- 0
Ju
n07
Ju
7
pr
-0
A
b07
Fe
-0
6
D
ec
6
ct
-0
O
06
ug
A
n06
Ju
6
pr
-0
A
b06
Fe
-0
5
D
ec
5
ct
-0
O
05
ug
-
Prod Fluid level, ft MD
4,000
Well shut-in Feb 15/08

to comply with Directive 60
100
H2O Rate (bbls) - Gas Rate (Mscf/d)
Appendix 4a Contd
Production Plots
Back to
Summary page
1,000
Water Rate (bbls/d)
Gas Rate (Mscf/d)
100
10
1
Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Jul-07
Jul-07
Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08
Date
17
Appendix 4a Contd
Production Plots
Back to
Summary page
1,000
Water Rate (bbls/d)
Gas Rate (Mscf/d)
100
10
1
Dec-06 Jan-07
Feb-07 Mar-07
Apr-07 May-07 Jun-07
Jul-07
Aug-07 Sep-07
Oct-07
Nov-07 Dec-07 Jan-08
Date
18
Feb-08 Mar-08
Apr-08 May-08 Jun-08
Appendix 4a Contd
Production Plots
Back to
Summary page
1,000
Water Rate (bbls/d)
Gas Rate (Mscf/d)
100
10
1
Jan-08
Feb-08
Mar-08
Apr-08
Date
19
May-08
Jun-08
Appendix 4a Contd
Production Plots
Back to
Summary page
1,000
Water Rate (bbls/d)
Gas Rate (Mscf/d)
100
10
1
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
Date
20
May-08
Jun-08
Appendix 4a Contd
Production Plots
Back to
Summary page
1,000
Water Rate (bbls/d)
Gas Rate (Mscf/d)
100
10
1
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
Date
21
May-08
Jun-08
Appendix 4a Contd
Production Plots
Back to
Summary page

1,000
6000
Water Rate (bbls/d)
5000
Gas Rate (Mscf/d)
100
4000
3000
10
2000
1000
1
Aug-07
0
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Date
22
Mar-08
Apr-08
May-08
Jun-08
Appendix 4a Contd
Production Plots
Back to
Summary page
1,000
Water Rate (bbls/d)
Gas Rate (Mscf/d)
100
10
1
Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Jul-07
Jul-07
Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08
Date
23
Appendix 4 b
Gas & Water Analyses
102/08-20-44-22W4 (also known as 102/01-20)
100/03-28-45-22W4
100/02-29-45-22W4
None to Report
24
Appendix 4 b contd
Gas & Water Analyses 100/01-18-46-24W4
25
Appendix 4 b contd
Gas & Water Analyses 100/01-18-46-24W4
26
Appendix 4 b contd
Gas & Water Analyses 100/03-20-46-24W4 (also known as 100/01-20)
27
Appendix 5
Capital and Operating Statements
Horizontal Mannville Capital Cost Estimates
AFE #
AFE Type
Initial Estimate
Supplements Note* Total Estimate
2005 Program
100/01-11-047-24W4 - Wetaskiwin
3027705 Drilling
4040205 Completion
5002105 Equipping
5002205 Capitalized Op Costs
6000406 Recompletion
100/13-04-048-21W4 Bittern Lake

3030805 Drilling
5004005 Equipping
733,000.00
66,341.00
298,435.00
284,245.00
458,520.00
89,240.00
1,929,781.00
805,065.00
192,390.00
1
2
1,538,065.00
258,731.00
298,435.00
875,446.00
808,990.00
346,633.19
4,126,300.19
591,201.00
350,470.00
257,393.19
2,196,519.19
3
4
5
733,000.00
298,435.00
284,245.00
103,520.00
1,419,200.00
1,181,700.00
80,100.00
436,372.50
125,000.00
1,823,172.50
6
7
8
9
1,914,700.00
378,535.00
720,617.50
228,520.00
3,242,372.50
1,501,765.16
475,690.00
307,505.00
416,827.00
2,701,787.16
530,238.00
989,800.00
10
11
2,032,003.16
1,465,490.00
307,505.00
416,827.00
4,221,825.16
12
13
1,802,405.16
1,205,590.00
272,155.00
405,677.00
3,685,827.16
14
1,966,218.00
725,160.00
207,505.00
352,827.00
3,251,710.00
2006 Program
100/01-20-044-22W4 New Norway
3035706 Drilling
4023806 Completion
5005906 Equipping
102/01-29-045-22W4 New Norway

3035506 Drilling
4023606 Completion
5005706 Equipping
1,501,765.16
475,690.00
272,155.00
405,677.00
2,655,287.16
1,520,038.00
300,640.00
729,900.00
1,030,540.00
2007 Program
102/08-20-44-22W4 - New Norway
3004007 Drilling
4008507 Completion
5003107 Equipping
100/03-28-45-22W4 - New Norway

3004107 Drilling
4008607 Completion
5002907 Equipping
100/02-29-45-22W4 - New Norway

3004207 Drilling
4008707 Completion
5008107 Equipping
100/01-18-46-24W4 - Wetaskiwin
3003907 Drilling
4005507 Completion
5007107 Equipping
100/01-20-46-24W4 - Wetaskiwin
3035806 Drilling
4008807 Completion
5007207 Equipping
1,499,628.00
725,160.00
207,505.00
352,827.00
2,785,120.00
1,499,628.00
725,160.00
207,505.00
352,827.00
2,785,120.00
1,499,628.00
725,160.00
207,505.00
352,827.00
2,785,120.00
1,499,628.00
725,160.00
288,870.00
296,637.40
2,810,295.40
1,499,628.00
725,160.00
288,870.00
296,637.40
2,810,295.40
466,590.00
466,590.00
332,795.00
1,499,628.00
1,057,955.00
207,505.00
352,827.00
3,117,915.00
0.00
1,499,628.00
725,160.00
207,505.00
352,827.00
2,785,120.00
332,795.00
191,092.00
105,040.00
15
16
17
296,132.00
356,530.00
356,530.00
18
1,690,720.00
830,200.00
288,870.00
296,637.40
3,106,427.40
1,499,628.00
1,081,690.00
288,870.00
296,637.40
3,166,825.40
28
Appendix 5 Contd
Horizontal Mannville Capital Cost Estimates

Supplemental Cost Notes:
1 Well was originally AFE'd for 12 days. Actual time was 18 days due to the following issues: Extra 1/2 day rigging
up topdrive. Numberous motor failures while drilling intermediate hole. Build section drill much slower than
expected (1 day longer) EUB required us to log the intermediate hole with drill pipe (lost 1 day). Lost 1/2 day with
topdrive failures. Staged the cement job for intermediate section. EM tool failures while drilling horizontal section.
Longer amount of time drilling the sump section of the hole than anticipated. Unplanned gyro surveys for sump
section of the hole.
2 This AFE is required to pull the pump and sump liner, run in with tubing and clean out the Hz section, and re-run
the liner and pump.
The original cost estimate did not include a chemical squeeze or coil tubing cleanout to the toe of the well. An
extra 8 days of rig time was required for swabbing and build up testing.
3 The capital funds allocated in the original AFE was to cover all operating costs of producing our Mannville Hz
CBM 100/01-11-047-24W4 for a 6 month period. Supplements were requiered to add 24 months of captalized
operating costs.
4 Funds are required for a "Surgi Frac" stimulation on hz MNVL CBM well.
Supplemental Funds are required. Complicated well conditions resulted in the need for large quantities of
additional fluid and two days of extra time to complete the procedure.
5 These funds will cover the cost of performing a N2 coil tubing cleanout on our Hz MNVL CBM well: 100/01-11-04724W4/00.
Supplement Justification: This AFE was for 1 coil cleanout for the 1-11 well to restore production of the well due to
sand buildup from the frac due to flowing the well. Subsequently there were 4 more cleanouts done.
6 Reason for Supplements: Well was originally AFE'd for 12 days. Actual time was 21 days due to problems
encountered in the horizontal section. Directional tools were lost as a result of getting stuck. Additional excessive
hole problems caused high cost overruns.
7 The majoity of these supplemental funds (93%) are to cover the costs of the material transfer costs of 3 x 400 bbl
production tanks ($75,000). Being that the tanks were in QRCI inventory, the costs were not included from the
cost estimate.
8 Supplement 1 Explanation:
The capital funds allocated in the original AFE were to cover all operating costs of producing our Mannville Hz
CBM well: 100/13-04-048-21W4 for a 6 month period. As of March 31st, the well has been producing for a total
of 19 months (13 months longer than originally AFE'd for). Therefore, the supplemental capital is to cover this
additional 13 months of operating expenses and pump change workovers.
10
11
12
13
14
15
16
17
18
Supplement 2 Explanation:
The previous capital funds allocated for this AFE were to cover operating costs of the experimental horizontal well
up to March 31/07. Since then, the well has been operating for an additional 10 months. The supplemental
capital funds are therefore to cover these last 10 months of operating expenses as well as 6 months going
forward - up until June 30/08. Please refer to the Estimate tab for a breakdown of supplemented costs. This
supplement also includes costs required for the purchase of a flare stack for the well - this will remove the
This operation entails pulling the rod string, BHP, tubing, and sump liner with a service rig. The intent is to run in
the hole with coil tubing and perforam a chemical flush / cleanout on the horizontal lateral to eliminate the wax
accumulation.
AFE Supplement is required due to overexpenditure. A scope change in the project as well as a fishing job
resulted in the overexpenditure.
Supplement 1: Long rig move and rig up time due to brand new rig. Drilled for three extra days on intermediate
hole due to geological reasons. High construction costs due to wet conditions, required extra stripping and lease
preperation.
Supplement 2: Well was drilled directional and took more time than anticipated thus increasing service and day
rate costs. Not originally AFE'd for core.
Scope of completion program changed from the initial AFE. Additional swab evaluation was required, and a
fishing job contributed to the overexpenditure.
Rig moving costs higher then AFE'd for due to size of rig, and rig availablity. Also charged for de-mob on this well
as it was drilled after 2-20HZ. Directional costs higher then Afe'd for due to cost of running specialized directional
tools (PerriScope tool).
Scope of completion program changed from original.
Well became unstable while running casing, had to side track.
Overexpenditure due to change in fracture procedures and efforts to repair parted casing in horizontal section of
wellbore.
Very high construction costs due to rush to get on location, and very soft and wet conditions. Higher then
expected directional and geological supervision costs.
Overexpenditure caused by lost circulation and hole cleaning problems after frac treatments.
Overexpenditures related to various problems that occurred during the well completion. CBL indicated that most
of the liner was not cemented, a Surgifrac was done to stimulate the uncemented section, a casing frac was done
on the cemented section. Two fishing operations were required and a leak at the liner top necessitated running
isolation tools to identify leak source. Considerable rental costs were incurred waiting on Halliburton frac crew and
contuously re-heating frac fluid.
29
Appendix 5 Contd
Please see attached file [] for accounting detail statements.
30
Appendix 5 Contd
31
Appendix 5 Contd
32
Appendix 5 Contd
100/13-04-048-21W4/00
No Operating Summary Information to report.
33
Appendix 5 Contd
34
Appendix 5 Contd
35
Appendix 5 Contd
102/08-20-044-22W4/00 (also known as 102/01-20)
36
Appendix 5 Contd
100/03-28-045-22W4/00
37
Appendix 5 Contd
100/02-29-045-22W4/00
38
Appendix 5 Contd
39
Appendix 5 Contd
100/03-20-046-24W4/00 (also known as 100/01-20)
40
Appendix 6 c
Major Facilities Diagram
Flaring Scheme
41
Appendix 6 c
Major Facilities Diagram
Gas Lift Scheme
[To follow under separate cover]
42

01-014 Mannville Horizontal NGC Project (Final)

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01-014 Mannville Horizontal NGC Project (Final)

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Innovative Energy Technologies Program

Project Annual Report Requirements

QRCI Mannville Horizontal NGC Project

Project Annual Report Requirements

Project Annual Report Requirements

Pressure, temperature, and other applicable reservoir data.

Any other measurements, observations, tests or data pertinent to the pilot.

Interpretation of pilot data.

Project Annual Report Requirements

Producing, on production date: 20-Jul-05

Spacing and pattern.

Production performance and data

Project Annual Report Requirements

Stabilized Gas production rate: 2.0 e3m3/day

Composition of produced / injected fluids.

Project Annual Report Requirements

Lower-than-expected formation permeability

Pilot economics to date

Crown royalties, applicable freehold royalties, and taxes.

Project Annual Report Requirements

Cumulative project costs and net revenue.

Explanation of material deviations from budgeted costs.

912 Pump Jack system

640 Pump Jack system

185 HP screw compressor

95HP screw compressor

102/08-20-044-22W4/00 (also known as 102/01-20)

185 HP reciprocating compressor

VSH2 hydraulic jack

100/03-20-046-24W4/00 (also known as 100/01-20)

VSH2 hydraulic jack

Capacity limitation, operational issues, and equipment integrity.

Project Annual Report Requirements

Procedures to address environmental and safety issues.

Plan for shut-down and environmental clean-up

Future operating plan

Interpretations and Conclusions

Lower-than-expected formation permeability

Project Annual Report Requirements

Technical and economic viability.

Overall effect on overall gas and bitumen recovery.

Assessment of future expansion or commercial field application and discussion of reasons.

Project Annual Report Requirements

Project Annual Report Requirements

Project Annual Report Requirements

100/01-11-047-24W4 Production Chart

Water Rate (bbls/d)

Project Annual Report Requirements

Producing Fluid Level, ft MD

Water Rate (bbls) - Gas Rate (Mscf/d)

100/13-04-048-21W4 Flow Test Chart

Water Rate (bbls/d)

Project Annual Report Requirements

Prod Fluid level, ft MD

Well shut-in Feb 15/08

H2O Rate (bbls) - Gas Rate (Mscf/d)

Fluid Level (MD ft from Surface)

100/01-20-44-22W4 Production Chart

Water Rate (bbls) - Gas Rate (Mscf/d)

Gas Rate (Mscf/d)

Project Annual Report Requirements

102/01-29-045-22W4 Production Chart

Water Rate (bbls) - Gas Rate (Mscf/d)

Gas Rate (Mscf/d)