EXHIBIT 1.6
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
Background
This document has been drafted to describe the most relevant aspects of
technology development that can be identified at this time and to define
performance targets relating to technology development and transfer. The
projects and deliverables will be broken into two development plans, 0-18
months, followed by a second from 18-36 months. The plan will be used to assess
performance for "B" type bonus scheme participants and to provide a mechanism
for the acceleration of the third share release.
Mechanics of the Bonus Program
1. The award will be based on achieving a given number of milestones in
the given timeframe on a sliding scale. (See enclosed table)
2. The ability to move the milestones from time period 1 to time period 2,
and vice versa, or the ability to add and delete projects will be based
on business needs. The ability to change milestones is subject to PES
management team recommendation & HES management approval. Changes to
the plan agreed to by PES/HES will be documented in an addendum to the
plan. Any impact to the bonus structure would also be reviewed and
agreed to at that time.
3. Total incentive = 100% annual base pay, with 40% guaranteed and 60%
based on performance. A maximum of fifty percent of the total award is
available for the 0-18 month development plan, and fifty percent is
available for the 18-36 month development plan. The award will be made
not earlier than 15 months from date of closing (provided all tech plan
components are completed) nor later than the end of the first 18-month
time period. The second award will be made at the completion of 18-36
month tech plan, not to be earlier than15 months from date of the first
award nor later than 36 months from date of closing. The second award
can only be made early in the event that all incomplete items from the
0-18 month plan are achieved, unless the PES management team and the
HES management team agree to drop them.
4. Incentives not awarded due to less than maximum awards being made will
revert to HES.
5. Development Plan for 18-36 month projects to be developed within first
12-18 months by PES management team recommendation & HES management
approval.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
6. Scheme is intended as a retention method for key employees employed at
the time of closing (reference category type B personnel previously
identified). It is not intended for hiring of new employees, however,
it would be possible to put new recruits on the program based on pro
rating dependent on entry time and subject to HES management approval.
7. HES employees involved with or transferred to PES will not participate
in the PES scheme. They will participate in the appropriate Halliburton
incentive scheme.
Early third share release: Release of the third tranche will be made at the same
time as the second award of the Technology Transfer & Development Plan. As
stated above, the second award will be made at the completion of the 18-36 month
Technology Transfer & Development Plan, not to be earlier than 15 months from
the date of the first award nor later than 36 months from closing.
First Time Period Development Plan (0-18 Months)
These Projects are divided into three categories. Two categories are for
technology/development projects from each of the SmartWell and Completion &
Intervention product groups, the other is for system and process projects. These
projects are to be completed in the first 18-month timeframe. The table below
provides a basis for the bonus payments to be awarded.
Guaranteed Performance
....................................................................................................................
40% 50% 60% 70% 80% 90% 100%
....................................................................................................................
Technology/Development Projects:
SmartWells Completed 0-2 4 6 8 9 10 11
....................................................................................................................
Technology/development projects:
Completion (non SmartWell) & 0 1 -- 2 -- 3 4 or
intervention completed more
....................................................................................................................
System & Process Projects Completed 0-2 3 4 5 6 7 8
....................................................................................................................
The award percentage is determined by the lesser number of projects completed
from the three categories. i.e. if 11 SmartWell projects were completed and 4
non SmartWell but only 5 system projects completed in the first 18 months, the
award percentage would be 70% of the maximum allowable award.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
For technology/development projects for Completion and Intervention Business
Unit, Project Numbers 1, 2 and 3 must be completed. The fourth project can be
selected based on business unit priority. It is recognized, during completion of
Project #1, other Projects may be identified as higher priority. The development
plan to be put forward and approved by management can be used to reassess the 4
projects for this group to work on. If there is a need to change, this plan will
be amended accordingly.
Technology/Development Projects and Systems and Process Projects are defined
below.
A. Technology/Development Projects: SmartWells
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
The highest priority shall be given to this area of technology development at
the time of this writing. This is based on the fact that short-term business
plans are heavily biased toward effective adoption XXXXXXXXXXX by leading
clients. This topic area includes all efforts to improve XXXXXXXXXXXXXX XX
systems with the existing functionality. It is recognized that most resulting
learning will be directly applied to other systems. By its nature, the concept
of continuous improvement means that this task will never be completed. This is
especially true when considering goals for lifetime operations of 10-20 years.
However a few short-term milestones XXXXXXXXXXXXXX are identified along with
estimated time frames below:
1. XXXXXXXXXXX Valves - Complete qualification of the XXXXXXXXXXXXXXXX
XXXXXX valve. All actions identified in recent Failure Mode Effect and
Criticality Analysis (FMECA) to be effectively completed. Long term
immersion test program to be initiated. (6months) Deemed complete at
the successful completion of long term XXXXXXXXXXXXXXXXXXXXXXX testing.
2. XXXXXXXXXXXXXXXXXX - Complete a critical detailed review of the
existing XXXXXXXXXXXXXXXXXXX system. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
Develop the system with improved performance against the elements of
the qualification program that can be evaluated through accelerated
testing. XXXXXXXXXXXXXXXXXXXXXXX. Long-term test program to be
initiated. XXXXXXXXXXX. Deemed complete at successful completion of
long term test program.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
3. XXXXXXXXXXXXXXXXXXXXXXXXX
Development of the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX Electronics - Complete prototype development
including functionality verification.
Perform accelerated life testing programs sufficient to
demonstrate and quantify improved lifetime performance
XXXXXXXXXXXXXXXXXXXXXXXXXXX.
XXXXXXXXXXXXXXX. Produce summary report.
Initiate XXXXXXXXXXXXXXXXXXX test program. Test population to be
provided by building extra samples XXXXXXXXXXXXXXX.
4. Long Term XXXXXXXXXXX Test - Successful completion of a XXXXXXXXX
system test program. Test program XXXX to be sufficient to establish
confidence XXXX XXXXXX by key customers. Several opportunities are
planned which could satisfy this goal including the testing underway at
HES Carrollton XXXXXXXXXXXXXX. Testing needs to be performed
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXX as part of fully integrated
long term system testing with all major components. Deemed complete
when test have been successfully completed and results documented in
engineering reports.
5. XXXXX - Several other areas of the system will undergo analysis and
further development, XXXXXX. Specific program goals will be established
for completion in the 6-18 month time frame. Note that the review
process may identify other aspects, not listed, which may be targeted
as higher priority.
. XXXXXXXXXXXXXX
. XXXXXXXXXXXXXX
. XXXXXXXXXXXXXX
. XXXXXXXXXXXXXX
. Dynamic Seals
. Instrument Wire
. XXXXXXXXXXXXXX
. XXXXXXXXXXXXXX
Step 1) Review to establish program deliverables (6 months);
Step 2) Achievement of specific goals identified in the 6-18 month
period as per the program deliverables defined in Step 1 above.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
6. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXX
7. XXXXXXXXXXXXXX It should be noted that several remote control systems
XXXXXXXXXXXXXX have already been deployed by PES.XXXXXXXXXXXXXX . While
significant work can be expected to provide these systems in different
sizes and packages, this will be driven by application requirements. It
is essential XXXXXXXXXXXXXX XXXXXXXXXXXXXX to ensure that the products
are positioned effectively XXXXXXXXXXXXXX. Develop a Business Plan
XXXXXXXXXXXXXX, complete with development plans and milestones. Prior
to the development of the business plan it is understood that a
methodology review for remote control of both HES and PES product
offerings would be required. Areas to be discussed include
XXXXXXXXXXXXXX XXXXXXXXXXXXXX third parties XXXXXXXXXXXXXX. Deemed
complete when a completed business plan has been presented and approved
by PES and HES management teams.
8. XXXXXXXXXXXXXX - Design, build and test XXXXXXXXXXXXXX XXXXXXXXXXXXXX
system capable of operating at XXXXXXXXXXXXXX depth. Document and
report results accurately describing operating parameters, control
fluids and other relevant parameters. Further development of control
module is likely to be curtailed following the above report as part of
the overall XXXXXXXXXXXXXX offering XXXXXXXXXXXXXX. Deemed complete
when prototype is built tested and documented.
9. XXXXXXXXXXXXXX - This is a system to provide XXXXXXXXXXXXXX control
with a XXXXXXXXXXXXXX number of hydraulic control lines. Step 1)
Complete the prototype qualification program. Step 2) Stage system for
field deployment. Deemed complete when steps 1 and 2 are successfully
completed.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLBURTON COMPANY
10. Create Development Plans for XXXXXXXXXXXXX Systems and integrate into
business plan for 12-24 month execution. XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX XXXXXXXXXXXXX. Consideration should XXXXXXXXXXXXX be given
to potential future trends in the industry XXXXXXXXXXXXX. Deemed
complete when a completed business plan has been presented and
approved by PES and HES management teams.
11. Create Strategy, Development, and Implementation Plan on
Communications XXXXXXXXXXXXX. Deemed complete when a completed business
plan has been presented an approved by PES and HES management teams.
Note: All development projects require thorough reporting and documentation.
B. Technology/Development Projects: Completion XXXXXXXXXXXXX Products
1. Review current and planned product & service offerings and current
development plans, identify overlaps XXXXXXXXXXXXX, and rationalize
same. Develop plan for product and service offerings and future
development projects for Completion and Intervention Business for PES
and HES management teams review and approval.
2. XXXXXXXXXXXXX Valve with XXXXXXXXXXXXX Control Line XXXXXXXXXXXXX -
Develop XXXXXX Valve XXXXXX for string applications with XXXXXXX
capability to accommodate Control Lines which will be used to
XXXXXXXXXXXXX for XXXXXXXXXX monitoring. Deliverable - one working
prototype tool available for field run.
3. XXXXXXXXXXX System for XXXXXXXXXX Control Line XXXXXXXXX - Develop a
XXX system to provide XXXXXXXXXXX in applications in which XXX control
lines will be used to control down-hole devices. XXXXXXXXXXXXX.
Deliverable - working prototype system available for field run.
4. Advanced XXXXXXXXXXXXX Head. - Step 1) Finalize design specifications,
build and test prototype tool. Step 2) complete one successful field
run to prove system functionality.
5. Completion XXXXXXXXXX System - Design, build and test Completion XXXX
System XXXXXXXXXXXXXXXX. System must be capable of competing with
competitive XXXXXXXXXXXXX systems. Deliverable - one prototype tool
available for field run.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
6. HP/HT Packer XXXXXXXXXX - Complete test program to prove out mechanical
design XXXXXXX for HP/HT Packer for XXXXXXXXXX. Complete system
integration testing to qualify packer for XXXXXXXXXX. Deliverable -
complete prototype testing and deliver 4 tools XXXXX.
7. XXXXXXXXXX Valve - Design build and test XXXXXXXXXXXXXXXXXXXX Valve,
XXXXXXXXXX capable of being run at depths XXXXXXXXXX. Deliverable - one
working prototype tool available for field run.
8. XXXXXXXXXX Setting Tool - Develop motorized setting tool capable of
setting PES intervention plugs XXXXXXXXXX . Tool should be based on the
design concept employed in the existing XXXX setting tool.
Deliverable - complete at least one successful field run.
9. XXXXXXXX Anvil size 5" - Develop Anvil for XXXXXXXXXX, size 5".
Deliverable one working prototype tool available for field run.
10. XXXXXXXXXX Safety Valve - Develop XXXXXXXXXXXXXXXXXXXX safety valve
XXXXXXXXXX. Deliverable - one working prototype tool available for
field run.
11. XXXXXXXXXX - Develop XXXXXXXXXX Plug for intervention applications
capable of passing through 5 1/2" tubing XXXXXXXXXX. Deliverable one
working prototype tool available for field run.
Note: All the above development projects require thorough reporting and
documentation as well as the developed hardware.
C. System and Process Projects
The following databases and standard ways of collecting and reporting
information are to be implemented. Unless otherwise indicated, these relate to
PES information generated at all PES engineering locations. To accomplish this
most databases and applications will operate through the developing Virtual
Private Network (VPN) being commissioned shortly. In order to effectively
provide the tech transfer capability desired for HES, each item listed will be
demonstrated as being completed when it can be accessed smoothly from a
workstation in the HES Carrolton TX facility. This will require some IT
cooperation between HES and PES to provide the VPN extension.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
1. Specification Cross - References - A specification x- reference list
will be prepared for proprietary standards that exist in both PES and
HES. These standards include materials, coating, heat treating, and
other standards. A process is to be put in place to ensure that
integrity of the x-reference list is maintained on an ongoing basis.
Both sets of specifications shall be made available on a real time
basis in both PES and HES engineering locations, which will allow
either organization to reference these as required. Deemed complete
when all active specifications have a cross-reference to HES
specifications or that there is no cross-reference applicable.
2. Development Test DataBase - This is a database to be created and
maintained to allow access to existing and ongoing technical
developments. Entries will be made summarizing all engineering test
work. It should be noted that in some locations this information has
been maintained in various electronic forms while in other locations,
only lab book entries are available. Some previous lab book entries
will be entered retrospectively. Deemed complete when 1) list is
compiled of all development tests conducted to date & identifying those
of significance to be entered into the system; and 2) entered into the
database and accessible from HES workstation in Carrollton.
3. Commodity Number Database - This database is to contain an entry for
every PES Assembly, Subassembly, and component. The database contains
or provides the entry point to view or print all the application /
performance related information on the PES product offering. Controlled
and uncontrolled documents are accessible through links to entries in
this database. Current Bill of Materials (BOM) s are also to be
viewable through this application. Deemed complete when you can search
and find all PES assemblies, subassemblies, and components through this
application including reference to bills of material,
application/performance information & controlled/uncontrolled
documentation from HES Carrollton workstation.
4. Controlled Document Database - All PES engineering documents regardless
of geographic location are to be viewable through directly through this
database application. This database provides a detailed revision
history for each document. Deemed complete when all global PES
engineering documentation are loaded and viewable through HES Carrolton
workstation.
5. Migration to a single Computer Aided Design/Computer Aided Engineering
(CAD/CAE) system for mechanical drawings in all PES engineering
locations which is compatible with HES systems. A PES group wide
evaluation of systems has been undertaken and is about to be concluded.
XXXXXXXXXXXX, it has been
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
By HALLIBURTON COMPANY
determined that Solid Edge, the system in use at HES, can adequately
meet the anticipated needs of PES. Deemed complete when all mechanical
engineers and drafters have been trained on, have access to and uses
Solid Works to complete engineering designs on all new projects.
Processes:
- ---------
6. Migration XXXXXXXXXXXX to a recognized standard. PES shall move to
conformance to the Global Engineering Drafting Standards with minor
exemptions to be noted in our drafting practice manual. Deemed complete
when all mechanical engineers and drafters have been trained, have
access to standards and are using them for all new drawings.
7. Dedicated Transfer Process and Staff: Both PES and HES will have
assigned at least one full time employee on a full time basis to
develop and execute the ongoing program to maximize the impact of PES
within HES operations and vice versa. They will be tasked with
developing the processes and execution in the following areas:
Identify opportunities for technology transfer on a product or
technology basis.
Executing the transfer process.
Verifying that process is working effectively.
Successfully executing a pilot project.
Production of relevant Product Updates as currently produced
by Global Advisors for various HES Product Service Lines
(PSL)s.
Providing content for Web Based access to PES products
and vise versa via HALWORLD Intranet site.
Prepare an application guideline document on various
SmartWell system available and provide description of how
each delivers value relative to others.
Business Development (BD) commercial strategies for the
various approaches will be included.
Deemed complete when we have successfully executed a pilot
project of technology transfer, regularly provide product
updates, have PES products loaded on Halworld Intranet site,
have completed application guideline document.
8. Familiarization training to be conducted in an appropriate form with
relevant Global Advisors, Manufacturing Reps, and relevant technology
personnel for various product segments as follows; Safety Valves,
Packers, Intervention Systems, Flow Controls, and Control Systems. This
is to stimulate peer to peer interaction and familiarity as well as
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
specific information exchange. Initially two-day sessions for each
focal group should be planned. Deemed complete when two-day sessions
have been conducted for above product line topics.
Second Time Period Development Plan (18-36 Months)
These Projects are not as easily identifiable at this time due to not knowing
precisely where the market will be in 18-36 months. As mentioned in the
mechanics of the scheme at the beginning of this document, the PES management
team will be responsible for documenting this portion of the plan during the
first 12-18 month timeframe subject to HES management approval. However, the
following projects are being considered for development and will be evaluated
during the first 18 months in preparation for the second 18 months. These, or
other suitable projects will be put forward for approval.
D. Technology/development projects: SmartWells
1. XXXXXXXXXXX Sensors -XXXXXXXXXXX compatible XXXXXXXXXXX sensor
available to the industry. Approaches include building new tool or
completing XXXXXXXXXXX agreement XXXXXXXXXXX to provide a XXXXXXXXXXX
compatible device (TBD)
2. XXXXXXXXXXX control system meeting customer XXXXXXXXXXX requirements.
System qualification complete (24 months)
3. Support integration of XXXXXXXXXXX data and XXXXXXXXXXX function
variables into XXXXXXXXXXX project being developed at HAL (milestones
and timing TBD)
4. XXXXXXXXXXX Development - Develop outcome of project number 11 "Create
Strategy, Development, and Implementation Plan on Communications
XXXXXXXXXXX" (milestones and timing TBD)
5. XXXXXXXXXXX: The development plan associate with XXXXXXXXXXX Project #7
needs to be implemented during this timeframe.
6. Implementation of the Business Plan associated XXXXXXXXXXX from Project
#7 in the first 18 months projects will be implemented during this
timeframe. It should be noted that components of this project may be
completed during the first 18 months, however this note is placed here
for clarification/reminder purposes only.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
E. System and Process Projects
1. Personnel Knowledge Project Database - This is a database listing that
will be created one time. A listing will be made for each PES technical
employee identifying major projects on which they worked, products
where they have specific technical knowledge and other areas of
technical expertise. Deemed complete when all PES technical employees
knowledge database is loaded onto the Network.
2. Methods for communicating and implementing Engineering Change Notices
(ECN) s for designated products shall be effectively implemented
between HES and PES. Deemed complete when plan has been developed and
implemented to handle ECN process between HES and PES. This process
applies to product manufacturing by HES of PES products, and vice
versa.
3. Reporting of development for ongoing projects - A system of monthly
reporting and quarterly summaries will be instituted to communicate to
HES progress and status of all technology and engineering development
projects. Deemed complete when monthly and quarterly reporting occurs .
n a regular basis.
F. Technology / Development Projects: Completion (Non SmartWell) &
Intervention Products
1. XXXXXXXXXXX IGLS System XXXXXXXXXXX- Develop XXXXXXXXXXX IGLS
XXXXXXXXXXX. Deliverable - one working prototype tool available for
field run.
2. XXXXXXXXXXX Setting Tool - Develop XXXXXXXXXXX setting tool capable of
setting PES intervention plugs and packers (small sizes). Tool should
be based on the design concept employed in the existing XXXXXXXXXXX
setting tool. Deliverable - at least one successful field run.
3. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- one working prototype tool available for field run.
4. XXXXXXXXXXX Shifting Tool - Develop XXXXXXXXXXX Shifting Tool
XXXXXXXXXXX compatible with Advance XXXXXXXXXXX Head and XXXXXXXXXXX.
Deliverable - at least one successful field run of prototype tool.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN
CONFIDENTIAL TREATMENT REQUESTED
BY HALLIBURTON COMPANY
5. XXXXXXXXXXX isolation tools - Develop a XXXXXXXXXXX element system
compatible with intervention applications. Project to include
development XXXXXXXXXXX if special tools are required. Deliverable- one
working prototype tool available for field run.
6. IGLS System XXXXXXXXXXX- Develop a 3 1/2 IGLS System XXXXXXXXXXX
XXXXXXXXXXX. Deliverable - one working prototype tool available for
field run.
7. XXXXXXXXXXX Bridge Plug - Develop a retrievable bridge plug capable of
holding differential pressure XXXXXXXXXXX without damaging the tubing.
Deliverable - one working prototype tool available for field run.
PES TECHNOLOGY TRANSFER AND DEVELOPMENT PLAN