Michigan Antrim Shale
and
New Albany Shale of Indiana and Western Kentucky
First Albany Capital
EMERGING RESOURCE PLAYS CONFERENCE
July 19, 2006
Total Quality Management in
Exploration and Production Methods
Disclaimer
In this slide presentation, statements regarding our goals and objectives, our expected
methods of operation and development strategies, our expected and potential production
volumes, the volume of potential reserves, potential drilling locations, the timing of drilling
activities, when wells will begin producing, how many wells will be drilled, potential new
development theatres, the spacing of wells, drilling and operating costs, and other
statements that are not historical facts, contain predictions, estimates and other Forward-
Looking Statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although we believe that our
expectations are based on reasonable assumptions, we can give no assurance that our
goals will be achieved. Important factors that could cause our actual results to differ
materially from those included in the Forward-Looking Statements include the timing and
extent of changes in commodity prices for oil and gas, changes in market demand, drilling
and operating risks, the availability of drilling rigs, uncertainties about the estimates of
reserves, the availability of transportation pipelines, changes in laws or government
regulations, unforeseen engineering and mechanical or technological difficulties in drilling
and operating the wells, operating hazards, weather related delays, the loss of existing
credit facilities, availability of capital, and other risks more fully described in our filings with
the Securities and Exchange Commission, including Form 10-KSB filed March 31, 2006. We
may also change our business focus as new opportunities arise. All Forward-Looking
Statements contained in this presentation, including any forecasts and estimates, are based
on management’s outlook only as of the date of this presentation and we undertake no
obligation to update or revise these Forward-Looking Statements, whether as a result of
subsequent developments or otherwise.
Executive Summary
Low-risk, long-term production of unconventional gas
reservoirs in Antrim and New Albany Shales
88 BCF in proven reserves (1/31/06)
7,250 mcfe/day in production (mid-June)
Over 460,000 net acres (3/31/06) with over 3,000
potential drilling locations and over 2 TCF in potential
reserves
Of total acreage, ~20% Antrim and 80% New Albany
2006 Objectives:
AMEX listing by mid-year
Drill 200 wells (gross)
100 BCF in proven reserves by mid-year
The Company
Active in Antrim and New Albany Shales since 1997
Reverse merger with Cadence Resources, 10/31/05
AMEX listing, 5/24/06; Russell Indexes, 6/30/06
Management team has 18-24 years experience
Engineering/Geology team has 24-32 years experience
Foster an environment that appreciates creative
thinking and innovative use of technology
Dedicated to thoughtful and prudent pursuit of natural
resources while creating long-term value for
shareholders
Antrim and New Albany Shale Plays
Relatively shallow blanket
shale formations
High-upside, lower-risk
development potential
Technologies to Cope with Reservoir Risk
The Antrim Shale and New Albany Shale are “blanket”
formations covering significant areas of the Michigan
and Illinois Basins. Dry holes are rare.
Nevertheless, there are inherent reservoir risks.
What tools are being used to detect risky drilling areas?
Identification of Antrim Shale Scours
The Antrim Shale is partially or totally absent
in localized areas where ancient rivers and
glaciers have carved through the bedrock
This results in the drilling of dry holes unless
the scours can be identified in advance
Illustration of Antrim Shale Scours
Gravity Survey
Seismic can be used to
identify scours, but gravity
surveys provide an
inexpensive alternative
Identification of Antrim Shale Scours
Gravimeter
Antrim Shale Fracture Stimulations
How has Aurora optimized stimulations
of vertical Antrim Shale wells?
Primary Objectives:
Contact all potential pay
Reduce gel loadings to maximize fracture
conductivity
Antrim Shale Fracture Stimulations
Antrim Shale Well Log
Intervals of natural
fracturing: focus of
completion intervals
Bedding planes:
containment for fracture
stimulations
Black images
indicate fracturing
in the wellbore
Antrim Shale Fracture Stimulations
Aurora Procedure
300+ Perforations
Acid Wash Foot-By-Foot
4-stage Frac
Low Gel Guar-Borate System
Photos and illustrations courtesy of
BJ Services Company, U.S.A.
Operational Efficiencies
How has Aurora optimized the
production infrastructure for Antrim
Shale wells?
Primary Objectives:
Minimize back
pressure to maximize
gas desorption
Minimize
environmental
exposure
Operational Efficiencies
Low Pressure Gathering Systems
10" Poly Pipe used as flow
lines for gas and water
Use of Large Diameter Poly Pipe
Operational Efficiencies
Low Pressure Gathering Systems
Separate systems for gas and water
Gas and water lines
prior to burial
Operational Efficiencies
Low Pressure Gathering Systems
Flowline Sumps
Some water is entrained in
gas flowing from wells to
facilities
In areas of extreme
elevation changes, water
tends to collect in low spots
Electric water sumps are
installed to transfer water
from gas flowlines to water
flowlines in areas of difficult
access
This enables us to maintain
low wellhead pressures and
reduce frequency of pigging
Operational Efficiencies
Low Pressure Production Facilities
Traditional Reciprocating
Compressor Unit
Aurora’s Skid-Mounted
Compressor and Separator
Modular Screw Compressors
Flexibility in placement
Parallel or series
Single or 2-stage compression
Electric
Lower capital cost
Lower maintenance
Environmentally preferable
Reciprocating Compressors
Large size of units precludes
throughput flexibility
Typically up to 4 stages of
compression
Gas Driven
High capital cost
High maintenance
LOUD!
Operational Efficiencies
Low Pressure Production Facilities
Traditional Gas
Processing Facility
Aurora’s Low Pressure
Gas Processing Facility
BIG
small
Operational Efficiencies
Low Pressure CO2 Processing
Low Pressure Carbon Dioxide
Extraction
CO2 extracted at 100 psi
Less horsepower and fuel
required
Prototype installed in 2003
High Pressure Carbon Dioxide Extraction
Raw methane - CO2 mix compressed as necessary to enter sales line
(typically 1200 psig or greater)
CO2 removed by third party downstream and vented to atmosphere
Operational Efficiencies
Water Disposal
Tank-less Water
Disposal
Lower capital cost
Low profile automated
water handling system
has environmental
advantages
Would you want these
eyesores in your back yard?
Operational Efficiencies
Advantages of Aurora’s Low Pressure System
Significant reduction in capital expenditures
Increased production rates due to reduced
back pressure on wells
Commercial life of wells extended due to
reduced costs
Facility capacities can be optimized over life
of wells
Moving Forward
What innovations are currently
being implemented by Aurora?
Electric Submersible Pumps (ESP’s)
installed on Composite Coiled Tubing
Horizontal Drilling Designed to
Minimize Back Pressure
ESP Installations On Composite Coiled Tubing
Developed by
collaboration of Aurora
with two vendors
Patent pending on
ESP/composite tubing
connection
Composite coiled
tubing unit owned by
Aurora
No rig required -
significant cost savings
6 units currently
installed
Longest installation to
date is 3 months
6 additional units to be
installed over next 30
days
Horizontal Drilling Premise
New Albany Shale
Large vertical fractures
Predominant fracture orientation is E-W
Occurrence of N-S fracturing is limited
Horizontal drilling is the only effective means
to connect fracture planes
Orthogonal Vertical Fractures
Non-uniform Spacing
Characteristics of Natural Fractures
New Albany Shale
Vertical Well with
Fracture Stimulation
Horizontal Well
Drilling & Completion Objectives
New Albany Shale
Avoid plugging of natural fractures while drilling
Complete laterals open hole with no stimulation
Recover gas reserves from all organic members
Optimize drilling geometry and pump
selection/placement for water removal and
reduction of back pressure
Minimize surface footprint and optimize access to
locations
Horizontal Well – Typical Geometry
New Albany Shale
Window Milled in Casing at
KOP (Spill Point)
Cased Sump for
Pump
Open Hole Lateral
Clegg Creek
Camp Run /
Morgan Trail
Selmier
Blocher
Vertical Pilot Hole / Medium Radius / Open Hole
Lateral
- Gravity drainage to heel of lateral
- Fluid must overcome vertical distance to spill point
7” or 5-1/2” Casing Set at TD
Horizontal Well – Preferred Geometry
New Albany Shale
7” or 5-1/2” Casing
Set at KOP in Borden
Shale
Open Hole Lateral
Underreamed
Sump for Pump
Vertical Producer
(Water Production)
Pilot Hole for
Laterals
(Gas Production)
Clegg Creek
Camp Run /
Morgan Trail
Selmier
Blocher
Vertical Producer at Toe of Horizontal Well
- Gravity drainage to sump at toe of lateral
- Gas will travel uphole to pilot hole for laterals
- Water will travel downhole to vertical producer
- Declining lateral trajectory easier to drill
- More conducive to traversing deeper members
7” Casing Set at Top
New Albany Shale
Alternate Lateral
Questions?
Contact:
Jeffrey W. Deneau - Investor Relations
Aurora Oil & Gas Corp.
4110 Copper Ridge Drive, Suite 100
Traverse City, MI 49684
www.auroraogc.com
T: 231-941-0073
E: jdeneau@auroraogc.com
Share Price: $3.60
Shares Outstanding: 81.69M
Market Cap: $294M
*Price-related figures based on close 7/14/06
