(10a) Fluid Report Quality Control and Characterization for the Avalon Shale in Permian Basin

The Permian Asset is the operating name given to the assets acquired from Chesapeake (CHK) in 2012 by Shell. These assets are located in the Texas Delaware Basin Liquid Rich Shale (LRS) play. The core area of the acreage consists of stacked liquid rich pays in the Avalon, Bone Spring and Wolfcamp formations. This position is a joint venture within an Area of Mutual Interest (AMI) with Anadarko Petroleum Company (APC) with other operators holding minor positions within individual lease blocks.

The Avalon Shale is a organic-rich, self-sourcing liquid-rich shale (LRS) play in the Delaware Basin. The Avalon Shale, also called the Leonardian Shale, is an informal industry name that refers to the upper most part of the Bone Spring Formation; it is picked from the base of the Top Bone Spring Carbonate to the top of the 1^st Bone Spring Sand. The Avalon comprises mostly siliceous-calcareous shale, with interbedded carbonates (detrital) and siltstone to very fine-grained sandstone. It is up to 1000 ft thick and can be subdivided into three main intervals, Upper, Middle and Lower Avalon.

Fluids produced from the Avalon range in composition from volatile oil (42-47 degree API) on the eastern down-dip part of the basin to wet gas in the western up-dip part of the basin, consistent with the thermal maturity trend. Production trends indicate that GOR increase rapidly within 3-4 months of initial flowback, from initial GOR of 2000 scf/bbl to more than 10,000-15,000 scf/bbl. Prior to the acquisition CHK had the view that the Avalon was a retrograde condensate play and characterized their undeveloped locations using a gas type curve and an associated CGR. After Shell’s acquisition, thorough analysis of all existing fluid samples was carried out. Detailed quality assurance and quality control of data followed by fluid characterization in the software package PVTSim were undertaken. The major finding of this work was that the Avalon play was instead a volatile oil play with initial reservoir pressure very close to the bubble point of the oil. This view was more aligned with that of our partner (APC). This resulted in the development of new oil type curves with associated gas and NGLs. These type curves were integral to our planning, budgeting and reserve reporting processes.