LEAN MANUFACTURINGTIGHT OIL DESIGN & CONSTRUCTION SHONN ARNDT, CNRL DECEMBER 9, 2014

Simplify Streamline Continuous Improvement

Eliminate Waste!

business-conferences.com and cell 403 540 0633. My colleague Emma Borg, the Conference Producer will also be onsite for the duration ofthe event.

Critical Success Factors:

Please note two points that are critical to the success of this conference from the speakers’ perspective:

• Learning Focused Presentations - No Sales Pitches.

Delegates come here to learn about markets and strategies - not listen to investor presentations. Please keep company slides to a minimumand ensure you are teaching the delegates something valuable - this always yields a more positive and interested response. There should beno more than 1-2 slides on the company at the beginning with the main bulk of the presentation focusing on teaching the delegates somethingbased on the session outline you selected when you confirmed (online at: http://www.artificial-lift-production-canada-2014.com/3/agenda/23/agenda/[artificial-lift-production-canada-2014.com] The presentation can finish with an insight into your company'scapacities. We want to make sure you and the delegates gain as much as possible from this conference and this is approach is the way to doit.

• Speak For Full Duration (i.e, 30 minutes/ agreed duration with Producer)

It is essential that you fill your full allocated time slot - usually 30 minutes unless agreed otherwise. If in doubt, it's better to go over time thanbe under time. Please practice your presentation out loud and make sure it fills the whole time slot.

I look forward to receiving your Dinner responses and presentations soon. Please let me know if you have any queries and I will be more thanhappy to assist.

Mike SkwaraSenior EventManagerTelephone 403 540 0633Website www.canadian-business-conferences.com[canadian-

business-conferences.com]

Canadian Business Conferences is part of the London Business Conferences Group. Registered in England& Wales Company No: 5090859 VAT Registration No: 848 2026 26 Registered Offices: 25 St ChristopherStreet | London | EC2A 3EY. The information in this email is confidential and may be legally privileged. It isintended solely for the addressee. If you receive this email by mistake please delete it immediately and notifythe sender. Opinions expressed are those of the author and do not necessarily represent the opinion ofLondon Business Conferences Group. All sent and received emails from London Business ConferencesGroup are scanned for the presence of computer viruses and security issues however we cannot acceptresponsibility for any virus transmitted so please rely on your own email checking procedures.

WHO’S GOOD AT IT?

Reference 11,12,13

–SPE 96241

“Automotive, aerospace, shipbuilding and other industries with projects of similar scope and complexity to major facility EPC complete

projects with 40% less labour, equipment and resources…”

LEAN MANUFACTURING

Simplify Streamline Continuous Improvement

Eliminate Waste!

THE LEAN EXPERIMENT

5s - Sort, Set in Order, Shine, Standardize, Sustain

7 Wastes Defects, Waiting, Processing, Motion, Overproduction, Inventory, Transportations

VALUE ADD, NON VALUE ADD, WASTE

Reference 10

LEAN MANUFACTURING

Simplify Streamline Continuous Improvement

Eliminate Waste!

HOW DO WE CURRENTLY DO IT?

3. Functional Project Plans

1. Annual Business

Plan2. Master Project Schedule (6-12 months)

Product (Tight Oil, Tight Gas,

Other)

Could Need

Should Need

Work (Weekly) Did

4. Separate Supplier / Contractor Schedules

Should Do

TRADITIONAL TIGHT OIL PLAY?

Wells Wells Wells

SWF’s GasEmulsion

Fuel Gas

FacilityP/L Facility

P/L

Wells

Any waste in this process?

SWF’s

Trucking Trucking Trucking

Value Stream Map (VSM)

TRADITIONAL TIGHT OIL PLAY?

Wells Wells WellsSWF’s Gas

Emulsion

Fuel Gas

FacilityP/L Facility

P/L

Wells

Any waste in this process?

SWF’s

Trucking Trucking Trucking

Value Stream Map (VSM)

Delineate Appraise DevelopBattery0&0Sales0Line

Gathering0P/L's

Water0Flood

THE LEAN WAY!

3. Look Ahead Planning (lead time ~6 wks)

1. Annual Business

Plan2. Master Project Schedule (6-12 months)

Product (Tight Oil, Tight Gas,

Other) Small Integrated Projects

Could Need

Should Need

Production (Daily) Did

4. Last Planner Process (Weekly)

Ready to Release

Can Do

Will Do

Will Need

ID Constraints

Collaborative Pull Planning

15 min meeting Reference 14

VSM LEAN TIGHT OIL - PRIMARY

WellsSWF’s / Truck

Facility

Wells2 Wells / Sec

Sales P/L

Gathering SystemInfrastructure

Pad Facilities

Cost Reductions Trucking - 80% Well site - 23%0

1250

2500

3750

5000

2015 2016 2017 2018 2019 2020 2021 2022

1 rig (26 Pads)

13 Pads/yr

5000 BPD Battery

VSM LEAN TIGHT OIL - PRIMARY

WellsSWF’s / Truck

Facility

Wells2 Wells / Sec

Sales P/L

Gathering SystemInfrastructure

Pad Facilities

Cost Reductions Trucking - 80% Well site - 23%

Delineate Appraise Primary0Development

1 rig (26 Pads)

13 Pads/yr

5000 BPD Battery

VSM LTO - WATERFLOOD

WellsSWF’s / Truck

Facility

Wells2 Wells / Sec

Sales P/L

Gathering SystemInfrastructure

Pad FacilitiesWF Pilot

VSM LTO - WATERFLOOD

WellsSWF’s / Truck

Facility

Wells2 Wells / Sec

Sales P/L

Gathering SystemInfrastructure

Pad Facilities

Delineate Appraise Water0Flood

WF Pilot

LEAN MANUFACTURING

Simplify Streamline Continuous Improvement

Eliminate Waste!

Total Activities 9Completed Activities 6

Start Date 11/15/2015 Planned Percent Complete (PPC) 67%

Item Deliverable Accountable

Conditions of

Satisfaction M T W T F S SDone

? PPCPPC

Analysis Var Code1 Drill Well #3, 4 & 5 Pad 3 Drilling x x x x x x x Yes 100%2 Complete Well #4,5,6 &7 Pad 2 Completions x x x x x x x Yes 100%3 P/L to Pad#2 Facilities x x x Yes 100%4 Install Artificial Lift Pad 1 Production x x x x No 70% Priority well 75 Install Pad Facities Pad 1 Facilities x x x Yes 100%6 Install Power Pad 1 Power Co x No 50% Rescheduled 37 Start Up Pad 1 Operations x No 0% No Power 28 Construct Pad 4 Construction x x x x x x x Yes 100%9 Survey Pad & P/L Pad 5 Survey Co x x x Yes 100%

Var Code1 - Lack of Decision2 - Lack of Prerequisites3 - Lack of Staffing4 - Staff Missing Skill Set5 - Scope Change6 - Non Project Demand7 - Priority Change8 - Underestimate Effort9 - Poor Data Quality10 - Force Majuere

Weekly Work Plan - Tight Oil Play Example

0%#

20%#

40%#

60%#

80%#

100%#

120%#

Wk#1#wk#2#wk#3#wk#4#wk#5#wk#6#wk#7#wk#8#wk#9#

Planned'Percent'Complete'

Drilling#

Comple;ons#

Construc;on#

Survey#

Produc;on#

Facili;es#

Power#Co#

Opera;ons#

0#

1#

2#

3#

4#

Variance'Report'

WEEKLY WORK PLAN

Total Activities 9Completed Activities 6

Start Date 11/15/2015 Planned Percent Complete (PPC) 67%

Item Deliverable Accountable

Conditions of

Satisfaction M T W T F S SDone

? PPCPPC

Analysis Var Code1 Drill Well #3, 4 & 5 Pad 3 Drilling x x x x x x x Yes 100%2 Complete Well #4,5,6 &7 Pad 2 Completions x x x x x x x Yes 100%3 P/L to Pad#2 Facilities x x x Yes 100%4 Install Artificial Lift Pad 1 Production x x x x No 70% Priority well 75 Install Pad Facities Pad 1 Facilities x x x Yes 100%6 Install Power Pad 1 Power Co x No 50% Rescheduled 37 Start Up Pad 1 Operations x No 0% No Power 28 Construct Pad 4 Construction x x x x x x x Yes 100%9 Survey Pad & P/L Pad 5 Survey Co x x x Yes 100%

Var Code1 - Lack of Decision2 - Lack of Prerequisites3 - Lack of Staffing4 - Staff Missing Skill Set5 - Scope Change6 - Non Project Demand7 - Priority Change8 - Underestimate Effort9 - Poor Data Quality10 - Force Majuere

Weekly Work Plan - Tight Oil Play Example

0%#

20%#

40%#

60%#

80%#

100%#

120%#

Wk#1#wk#2#wk#3#wk#4#wk#5#wk#6#wk#7#wk#8#wk#9#

Planned'Percent'Complete'

Drilling#

Comple;ons#

Construc;on#

Survey#

Produc;on#

Facili;es#

Power#Co#

Opera;ons#

0#

1#

2#

3#

4#

Variance'Report'

WEEKLY WORK PLAN

0%

25%

50%

75%

100%

Wk01 wk02 wk03 wk04 wk05 wk06 wk07 wk08 wk09

Drilling

CompleLons

ConstrucLon

Survey

ProducLon

FaciliLes

Power0Co

OperaLons

Variance Report

0

0.75

1.5

2.25

3

20Q0Lack0of0Prerequisites

30Q0Lack0of0Staffing

90Q0Poor0Data0Q

uality

70Q0Priority0Change

10Q0Lack0of0Decision

80Q0UnderesLm

ate0Effort

60Q0Non0Project0D

emand

50Q0Scope0Change

40Q0Staff0Missing0Skill0Set

100Q0Force0Majuere

PROTOTYPING WATER TREATMENT EXAMPLE

Hydrocyclone

Electric Coagulation

Dissolved Gas Floatation

Multimedia Filtration

Microbubler

Chemicals

Warm Lime Softening

Membranes

SAC/WAC

Electrodialysis

Hydrocyclone

Dissolved Gas Floatation

Multimedia Filtration

SAC/WAC

Membranes

Skim Tank

Hydrocyclone /w membrane

DGF /w MMF

Electric Coagulation

EC /w MMF

New Standard DGF /w MMF, UF, Chemicals

Separate concept team from on going VSM Production

PROTOTYPING WATER TREATMENT EXAMPLE

Hydrocyclone

Electric Coagulation

Dissolved Gas Floatation

Multimedia Filtration

Microbubler

Chemicals

Warm Lime Softening

Membranes

SAC/WAC

Electrodialysis

Hydrocyclone

Dissolved Gas Floatation

Multimedia Filtration

SAC/WAC

Membranes

Skim Tank

Hydrocyclone /w membrane

DGF /w MMF

Electric Coagulation

EC /w MMF

New Standard DGF /w MMF, UF, Chemicals

Separate concept team from on going VSM Production

Concept Bench0Test Proof0of0Concept Implement

TRANSITION TO LEAN (1 - 2 YRS PER PRODUCT/SERVICE FAMILY)

• Functional to Integrated (VSM)

• Large Project Plans to Last Planner System (LPS)

• Batch to Continuous Process (Single Piece Flow)

• Continuous Improvement / Innovation

Reduction Goals 25% cost / Schedule, 30% expenses, 40% tech staff

Photo by dawnzandstra

Photo by EstonToph

REFERENCES1.    SPE-­‐165331-­‐PA  Applica1on  of  Toyota’s  Principles  and  Lean  Processes  to  Reservoir  Management:    More  Tools  to  Overload  the  Toolbox  or  a  Step  Change  in  Our  Business,  April  2014  

2.    SPE-­‐157907-­‐MS  Implemen1ng  Lean  Manufacturing  Principles  in  New  Well  Construc1on,  June  2012  

3.    SPE-­‐96241-­‐MS  Improve  Facility  Project  Delivery  With  Methods  for  Manufacturing  Excellence,  Oct  2005  

4.    SPE-­‐136528-­‐MS  5s  and  Its  Affects  on  HSE,  Oct  2010  

5.    White  Paper  Lean  Project  Management:    How  to  Manage  a  Project  with  Minimum  of  Overhead,  Stoterau  et  al  2012  

6.    Lean  Project  Management:    Assessment  of  Project  Risk  Management  Bosca  Thesis  2012  

7.    SPE  137865  Greater  Sierra  Jean  Marie  Tight  Gas  Carbonate:  Mul1disicpline  Approach  Drives  Decade  of  Development,  Bialowas  et  al,  Oct  2010  

8. The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer, Jan 2004

9. The Toyota Way Fieldbook: A Practical Guide for Implementing Toyota’s 4P’s, Oct 2005

10.    h^ps://www.youtube.com/watch?v=12lThqXA-­‐Dg  -­‐  Formula  1  

11.    h^p://www.autoblog.com/2010/07/22/report-­‐toyota-­‐to-­‐cut-­‐domes1c-­‐produc1on-­‐20-­‐percent-­‐as-­‐hybrid-­‐s/    

12.    h^p://boeing.mediaroom.com/2011-­‐06-­‐15-­‐Boeing-­‐to-­‐Boost-­‐737-­‐Produc1on-­‐Rate-­‐to-­‐42-­‐Airplanes-­‐per-­‐Month-­‐in-­‐2014#assets_117    

13.    h^ps://www.youtube.com/watch?v=Xm1-­‐r3yCteI  -­‐  Aera  Energy  Award  

14.    h^p://www.leanconstruc1on.org/training/the-­‐last-­‐planner/    

15.    h^p://innova1velyorganized.com/blog/thought-­‐clean-­‐off-­‐your-­‐desk-­‐for-­‐a-­‐fresh-­‐start-­‐to-­‐2012/    

16.    h^p://leankit.com/kanban/why-­‐use-­‐kanban-­‐boards/  

17.    h^p://www.systems2win.com/LK/lean/7wastes.htm