Sales Hints

Technology: PDC Bits for Directional Applications Provider: Smith Bits

Date Assessed: April 2012 Assessor: Richard Hill

Prior to the use of IDEAS with our PDC product line, our process of selecting PDC drill bits for use in directional
applications was very similar to that of our competition i.e. we were “feature” focused rather than “drilling
system” focused. Pre-IDEAS, we had no way of quantifying whether our selected PDC bit was compatible with the
directional drive type (steerable motor, steerable turbine or RSS) and so had to rely on the opinion of so called
internal “experts” and the demands of the directional drillers who had their own and often widely varying,
opinions as to what was required from a directional PDC bit. As a result, our PDC bit selection was diverse and was
more of an “art” than a “science” such that our success ratio was much lower than it is today, post IDEAS.

So called rotary steerable and steerable motor specific product lines relying heavily on features were developed
and introduced to the market with recommendations that they were not suitable for use on other drive types.
Industry accepted features like “active gauge” were accepted because they seemed logical but without proof that
they were actually required. We commonly manufactured many different options of the same bit with sometimes
the only difference being a-in in the length of the gauge pad! IDEAS changed all of the above and gave an
opportunity to Smith Bits’ sales and engineering groups the chance to dynamically analyze multiple PDC bits on
multiple drive types/BHAs taking into account multiple inputs that affect both drilling and directional performance.

Of course, we still offer a complete range of features so we can “fine-tune” our PDC bit selection to the directional
application. The majority of these features are similar to those offered by our competitors, the difference being
that we have the most advanced directional drilling simulation software in the industry (IDEAS) to model the
effects of these features and prove their validity through graphical, repeatable engineering outputs. This
differentiates and separates us from our competitors who still use an element of guesswork in both the selection
of their cutting structures and features. The Positive and Defensive Sales hints below are therefore strongly biased
towards the advantage that IDEAS gives us, rather than a simplistic comparison of physical bit features which all
the major bit companies can offer.

Positive Sales Tactic

The advantages of selecting a PDC bit with IDEAS, for use in a directional application, are a logical, and structured,
process that takes into consideration the specific drive type/BHA, well profile, drilling parameters and formation
types and strengths. Bit stability is vital in any directional drilling application to minimize toolface fluctuation. Our
directional PDC bit selection process can be summarized as:

a. Select the cutting structure (C/S) i.e. # blades, cutter size, SHARC feature, cutter type etc. based upon the
formation properties and length of section to be drilled. Use DBOS and offset bit runs to aid in bit C/S
selection to arrive at a generic bit type e.g. 516, 616 etc.

b. Note the suitable BOMs for those bits that meet the above generic bit type.

c. Submit IAR and/or IAPs to model the selected BOMs on the finalized directional BHA in IDEAS, using rock
files selected from reviewing the closest DBOS offset, mud weight to be used, expected well profile,
drilling parameters etc. All bits should be modeled in both “steering” and “drill-ahead” modes while
requesting the maximum 480 revolutions simulation period.

d. Filter the IAR/IAP output files to find the BOM that gives the best combination of steerability, stability and
ROP – torsional vibration is the enemy of directional drilling as it negatively affects toolface control so pay
particular attention to the bit torque output.
 e. Once you have narrowed down the options using the IAR/IAP process(es), the IAD (IDEAS analysis
directional) process can then be used to show graphical and numeric outputs for important directional
drilling KPIs such as walk rate, build/drop rates, DLS, toolface, inclination, azimuth, vibration,
displacements and well path geometry.

f. The numerous graphical outputs from the IDEAS IAR/IAP/IAD modeling can be used to provide our
customers with a comprehensive fully engineered, technical justification as to why our PDC bits should be
run, in preference to our competitors, in any directional application.

A summary of our unique PDC bit selection process highlights are:

• A free, fast, holistic and engineered recommendation that considers all aspects of a directional
drilling application and not just the bit itself.
• Bit selection is based on laboratory derived drilling rock mechanic testing and not simple generic
formulae.
• Comprehensive graphical outputs that can be used in either a sales proposal and/or technical
presentation which clearly demonstrates our superiority over our competitors.
• Proof that the bit type and features recommended are beneficial to the specific directional
drilling application. We are not “selling features.”

Smith Bits’ offers the following beneficial technologies for a directional application:

• depth of cut control (MDOC)

• Bit profile
• Short make up length
• Gauge pad geometry
o length
o width
o spiral angle
o part or full taper
o part of full undercut

The list above is offered by almost all PDC bit suppliers such that it is extremely hard, or impossible to convince our
customers that our directional bit is better than another based solely on the above features. It’s our engineered
IDEAS process that is the key differentiator.

Defensive Sales Tactics

a. Competitors can rightfully claim that IDEAS is not 100% accurate. This is true, no modeling software ever
is but IDEAS is significantly more advanced than anything else in our industry and will ensure a higher
success ratio than any other method currently available.

b. IDEAS can only be used with Smith Bits. This is not true, we can model any PDC bit from any supplier but
in order to do this we must have the detailed cutting structure design file. This information is normally
considered intellectual property (IP) and so our competitors are not willing to provide this information to
us.

c. Competitors can provide exactly the same cutting structure and features as a Smith directional bit. The
physical features may well be identical but our competitors can never say that the cutting structure is
identical - just because their bit has the same number of blades, cutters, and cutter size etc does not
mean it will behave the same dynamically.