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1 CLICK TO EDIT MASTER TITLE STYLE Click to edit master text styles Second level Third level Fourth level Fifth level MAXIMIZING SILICA DUST CONTROL COST EFFICIENCIES ACROSS THE FRAC SAND SUPPLY CHAIN PRESENTED BY: TOM THORN, COMMERCIAL MANAGER, OIL & GAS DUG EAGLE FORD TECHNOLOGY SHOWCASE NOVEMBER 16, 2017

2 CLICK TO EDIT MASTER TITLE STYLE Click to edit master text styles Second level Third level Fourth level Fifth level COMPANY BACKGROUND THIS IS WHAT BETTER LOOKS LIKE

3 ABOUT US Founded in 1967 Headquartered in Mulberry, FL Global leader in specialty chemicals for fertilizer production, mining chemicals and asphalt improvement Over 50 years of expertise in coating and coating application technology for granular substances ArrMaz treats more than 40 million tons of fertilizer per year 3

4 CLICK TO EDIT MASTER TITLE STYLE Click to edit master text styles Second level Third level Fourth level Fifth level OPTIONS FOR ADDRESSING HS&E HAZARDS

5 OPTIONS FOR ADDRESSING HEALTH & SAFETY HAZARDS 1. Elimination of the health and safety hazard 2. Engineered controls of the health and safety hazard 3. Training / Administrative and Work Practice Controls 4. Personnel Protective Equipment (PPE) Source: Occupational Safety and Health Administration 5

6 NIOSH COMPLIANCE STUDY

7 NIOSH STUDY CONFIRMS NEED FOR LOWER PEL 7

8 NIOSH STUDY CONFIRMS NEED FOR LOWER PEL Note, the values below are based on pre-2016 limits mg/m³ 0.05 mg/m³ 0.10 mg/m³ 8

9 CLICK TO EDIT MASTER TITLE STYLE Click to edit master text styles Second level Third level Fourth level Fifth level FRAC SAND REGULATIONS

10 REVISIONS TO FRAC SAND REGULATIONS RESPIRABLE SILICA DUST CREATED DURING SHIPPING AND TRANSFER OF SAND FOR FRACING IS DRIVING THE NEED FOR IMPROVED INNOVATIONS CHANGING REGULATIONS Health PEL (Permissible Exposure Limit) for respirable crystalline silica dust: OSHA & NIOSH have set strict PEL values for respirable crystalline silica dust: About 2 million US workers estimated to be occupationally exposed to respirable silica dust Breathing in silica dust causes silicosis, a chronic, incurable lung disease OSHA recently reduced the PEL for respirable crystalline silica dust: Previous calculated PEL was approx mg/m³ (Prior to June 23, 2016) Revised PEL is 0.05 mg/m³ (Effective June 23, 2016) OSHA recently specified an Action Level (AL) for respirable crystalline silica dust: mg/m³ (Effective June 23, 2016) 10

11 REVISIONS TO FRAC SAND REGULATIONS RESPIRABLE SILICA DUST CREATED DURING SHIPPING AND TRANSFER OF SAND FOR FRACING IS DRIVING THE NEED FOR IMPROVED INNOVATIONS CHANGING REGULATIONS Other key changes: Engineering controls to become 1 st line of defense (PPE will no longer suffice) Exceeding Action Limit to result in costly monitoring of site respirable crystalline silica dust levels and employee medical monitoring This is driving the need to find better and more effective technologies to control dust 11

12 COSTS OF COMPLIANCE

13 ENGINEERING CONTROL OPTIONS 13

14 ESTIMATED IH COSTS & REQUIREMENTS FOR RCS AT VARIOUS EXPOSURE LEVELS DESCRIPTION ABOVE THE PEL ABOVE THE AL BELOW THE AL IH Monitoring Costs ($/month) $149,400 - $194,200 $149,400 - $194,200 - Written RCS Plan Yes Yes No Pulmonary Function Test Yes Yes No Chest X-ray Yes Yes No Medical Record Keeping Req'd Yes Yes No Potential OSHA Fines Yes Yes No Assumptions: Perform (1) month of RCS sampling at hydraulic fracturing sites located in the Permian Basin of West Texas and within (3) hours drive from Midland, TX. A quantity of (6) personnel monitors and (4) area monitors will be required per site per shift. Operations are 24 hours per day with a (12) hour day shift and a (12) hour night shift. There will be (26) days of operations per calendar month. The final report to include all data and calculations required to determine Exposure Levels for total dust, total respirable dust, and total respirable crystalline silica dust, and to provide the determination if the results indicate exceeding the PEL of 0.05 mg/m 3, within the Action Level between mg/m 3 to 0.05 mg/m 3, or below mg/m^3. Personnel are responsible for all transportation to/from the site(s), lodging, meals, PPE, etc. TAKEAWAY: BEING ABOVE THE AL OF MG/M 3 CAN ADD SIGNIFICANT MONITORING COSTS AND REGULATORY REQUIREMENTS 14

15 INTRODUCTION TO SANDTEC

16 INTRODUCTION TO SANDTEC SandTec 9006 Coating Product SandTec Sand Coating Technology SandTec Application System Developed a water-soluble liquid product that is applied directly to sand grains 100% USDA Certified Biobased Product under the BioPreferred Program Works by applying a microscopic coating on sand proppant which controls dust and lowers fines generation by reducing attrition whenever proppant is transferred SandTec coating is uniformly applied to frac sand using our proprietary application system. No drying or curing time required Able to reduce up to 99% of silica dust Field tested to show it can deliver results below the OSHA Action Level No negative impact on fracturing operations or well performance 16

17 HOW SANDTEC WORKS COATING TRANSFER Uniform coating required Coating readily spreads from one particle to the next upon contact REDUCED ATTRITION & FINES GENERATION Coating transfer reduces attrition and silica fines generation as proppant is transported 17

18 HOW SANDTEC WORKS MISCIBLE & COMPATIBLE WITH FRAC FLUIDS SandTec Compatible with Frac Fluids

19 SANDTEC DATA TREATED SAND FIELD TEST Single well ops 23 total stages 8.9M lbs of treated sand 0.95M lbs 70/ M lbs 20/40 6.9M lbs 40/70 Slickwater frac fluid Personnel airborne monitoring Laboratory Results for Respirable Silica for Personal Monitor Samples Monitor 7/7 7/8 7/ N/A N/A 5 N/A N/A Vacuum system shut down Below Action Action Level Above PEL < mg/m < x < 0.05 mg/m 3 > PEL 19

20 SANDTEC RESULTS PNEUMATIC TRANSFER Untreated Treated 20

21 S A N D T E C R E S U LT S SAND BIN TO BLENDER TRANSFER 21

22 SUMMARY

23 SUMMARY OSHA revised the respirable crystalline silica regulation reducing the PEL and AL by 50% Stakeholders in the frac sand supply chain including transloads and frac sites must perform a respirable crystalline silica assessment by June, 2018 ArrMaz developed and patented a liquid chemical that when applied to frac sand will reduce silica dust be 99% Requirements include respirable crystalline silica assessment and written program An engineering control that does not meet the AL will require area and personnel monitoring, medical monitoring for exposed employees including chest x-ray and pulmonary function testing, 30-year medical record keeping per 29 CFR 1910 at significant additional cost Transload facilities deadline for full compliance including engineering controls is June 23, 2018 SandTec is a 100% USDA Certified Biobased Product under the BioPreferred Program SandTec meets the engineering control requirement, achieving below Action Level results at sand plant loadout, transloads, frac sites, and anything in between! 23

24 CLICK TO EDIT MASTER TITLE STYLE Click to edit master text styles Second level Third level Fourth level Fifth level THANK YOU THIS IS WHAT BETTER LOOKS LIKE QUESTIONS? TOM THORN COMMERCIAL MANAGER, OIL & GAS 24