CONFIDENTIAL
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`
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`GREENE’S ENERGY GROUP, LLC,
`
`Petitioner,
`
`v.
`
`OIL STATES ENERGY SERVICES, LLC,
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`Patent Owner.
`
`
`
`Case IPR2014-00216
`
`Patent No. 6,179,053
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`DECLARATION OF THOMAS W. BRITVEN
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`Greene’s Energy Group, LLC v. Oil States Energy Services, LLC
`IPR2014-00216
`Ex. 2018
`1
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`I, Thomas W. Britven, hereby declare as follows:
`
`(1)
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`I am an adult over the age of 18 and I make this declaration based on personal
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`CONFIDENTIAL
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`knowledge and under penalty of perjury.
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`(2)
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`I am an affiliate expert of Duff & Phelps, LLC and have been asked by counsel
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`for Oil States Energy Services, LLC, formerly known as Stinger Wellhead Protection, Inc.
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`(“Stinger”) (hereinafter “OSES” or “Patent Owner”) to submit this declaration regarding the
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`commercial success of products that practice the amended claims of United States Patent
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`Number 6,179,053 (“the ‘053 patent”). I hereby submit the following expert witness disclosure.
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`(3)
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`Based on my analysis, it is my opinion that the unique features and benefits
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`associated with the ‘053 patented technology, which is incorporated into OSES’ Stage Frac Tool,
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`have enabled the Stage Frac Tool to achieve commercial success for at least the following
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`reasons:
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`
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`
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`
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`
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`
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`
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`Stinger/OSES’
`marketplace;
`
` percent to
`
` percent estimated share of the stage frac tool
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`Stinger/OSES recorded total Stage Frac Tool net revenues of approximately
`, and approximately
` more in related products and
`services, from
` jobs, from May 1, 2006 through December 31, 2013;
`
`Stinger/OSES’ net revenues for Stage Frac Tools and related products and
`services related to the ‘053 patented technology have enjoyed a compound
`average growth rate of approximately
` percent from 2009 through 2013;
`
`For 2006 through 2013, the average price per job for jobs done using OSES’
`Stage Frac Tools was
`, which is much higher than the average price
`per job for OSES’ casing savers of
` for the same period. While prices
`for both have increased over time, the number of Stage Frac Tool jobs has
`increased and the number of casing saver jobs has decreased.
`
`Stinger/OSES’ Stage Frac Tools continue to be highly utilized even as the
`number of available Stage Frac Tools has increased from
` tools in 2007 to
` tools in 2013 in addition to increases in revenues per job; and
`
` percent for
`Stinger/OSES enjoyed an EBITDA margin of approximately
`Stage Frac Tools and related products and services for the period of 2012-
`
`2
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`CONFIDENTIAL
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`2013, while the rest of the company had an EBITDA margin that was
`significantly lower at approximately
` percent.
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`A discussion of the bases for my opinion is set forth in the balance of this Declaration.
`
`The “Fracking” Industry in General
`
`(4)
`
`Hydraulic fracturing, commonly referred to as “fracing” or “fracking,” is a
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`technique that has been used to stimulate the production of oil and natural gas since the 1940s.1
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`Currently, new developments in this technique allow access to low permeability formations that
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`contain large quantities of oil and natural gas that had previously not been accessible, such as
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`tight sands, shales, and coalbed methane formations.2
`
`(5)
`
`The process begins with drilling a hole below fresh water underneath the surface.3
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`Surface casing is next inserted to isolate the fresh water zone and provide structural support.
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`Cement is then put in place between the hole and the casing to seal off the wellbore from
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`freshwater and prevent contamination of the fresh water aquifer.4 Additional vertical and
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`horizontal drilling then continues until a target distance is met,5 at which point, additional casing
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`and cementing occurs.6
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`(6)
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`After production casing has been run and cemented in place, a perforating gun is
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`lowered into the well.7 The perforating gun creates holes in the casing by shooting hardened
`
`2
`
`
`1
`“Hydraulic Fracturing Q & A’s,” American Petroleum Institute (accessed: http://www.api.org/oil-and-
`natural-gas-overview/exploration-and-production/hydraulic-fracturing/hydraulic-fracturing-qa).
`“Hydraulic Fracturing 101,” Earthworks (accessed:
`http://www.earthworksaction.org/issues/detail/hydraulic_fracturing_101#.U8ANkPldX_E). See also
`“Hydraulic Fracturing Q & A’s,” American Petroleum Institute (accessed: http://www.api.org/oil-and-
`natural-gas-overview/exploration-and-production/hydraulic-fracturing/hydraulic-fracturing-qa).
`“Process of Fracking,” Shale Stuff (accessed: http://shalestuff.com/education/fracking/fracking).
`“Process of Fracking,” Shale Stuff (accessed: http://shalestuff.com/education/fracking/fracking).
`Vertical wells drilled in shale gas reservoirs may extend up to 5,000 to 8,000 feet beneath the surface with
`horizontal well extending up to two miles. See “Hydraulic Fracturing,” Post-Gazette (accessed:
`http://old.post-gazette.com/downloads/20110227Drilling_process.pdf).
`“Process of Fracking,” Shale Stuff (accessed: http://shalestuff.com/education/fracking/fracking).
`“Process of Fracking,” Shale Stuff (accessed: http://shalestuff.com/education/fracking/fracking).
`
`3
`4
`5
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`6
`7
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`3
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`CONFIDENTIAL
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`metal rods powered by explosive charges.8 This then allows hydrocarbons within the formation
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`to flow into the well.9 The fracturing fluids are next injected into the well at a very high
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`pressure.10 Fracturing fluids typically consist of water, sand, and chemical additives.11 The
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`pressure created by injecting the fluids opens the fractures, and the sand holds open the fissures,
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`allowing the oil or natural gas to flow up the well.12
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`(7)
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`A single fracking job can increase the pathways available for fluid migration as
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`much as 270 times in a vertical well, with even greater results in a horizontal well.13 Horizontal
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`drilling produces greater results than vertical drilling because horizontal drilling increases
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`productivity in low permeability rocks by bringing the well bore much closer to the source of the
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`fluid.14 Horizontal drilling also allows operators to cover a greater area with a single well by
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`drilling one or more horizontal branches.15 This allows operators to develop a reservoir with
`
`9
`
`10
`11
`
`12
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`
`8
`“Perforating Gun,” and “Perforate,” Energy Glossary, Centre for Energy (accessed:
`http://www.centreforenergy.com/Glossary.asp?Template=&SortBy=&GlossSearch=perfora&glossary_sear
`ch_submit1=&SearchType=0&EnergyType=).
`“Perforating Gun,” Energy Glossary, Centre for Energy (accessed:
`http://www.centreforenergy.com/Glossary.asp?Template=&SortBy=&GlossSearch=perfora&glossary_sear
`ch_submit1=&SearchType=0&EnergyType=).
`“Process of Fracking,” Shale Stuff (accessed: http://shalestuff.com/education/fracking/fracking).
`“Frequently Asked Questions About Hydraulic Fracturing,” Colorado Oil and Gas Conservation
`Commission (accessed:
`https://cogcc.state.co.us/Announcements/Hot_Topics/Hydraulic_Fracturing/Frequent_Questions_about_Hy
`draulic%20Fracturing.pdf).
`“Frequently Asked Questions About Hydraulic Fracturing,” Colorado Oil and Gas Conservation
`Commission (accessed:
`https://cogcc.state.co.us/Announcements/Hot_Topics/Hydraulic_Fracturing/Frequent_Questions_about_Hy
`draulic%20Fracturing.pdf). See also “Hydraulic Fracturing Q & A’s,” American Petroleum Institute
`(accessed: http://www.api.org/oil-and-natural-gas-overview/exploration-and-production/hydraulic-
`fracturing/hydraulic-fracturing-qa).
`“State Oil and Natural Gas Regulations Designed to Protect Water Resources,” U.S. Department of Energy,
`May 2009, p. 21 (accessed:
`http://www.gwpc.org/sites/default/files/state_oil_and_gas_regulations_designed_to_protect_water_resourc
`es_0.pdf).
`“Directional and Horizontal Drilling in Oil and Gas Wells,” Geology.com (accessed:
`http://geology.com/articles/horizontal-drilling/).
`“Drilling Sideways – A Review of Horizontal Well Technology and its Domestic Application,” Energy
`Information Administration, Office of Oil and Gas, U.S. Department of Energy, April 1993 at 4.
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`13
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`14
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`15
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`4
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`CONFIDENTIAL
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`fewer wells.16 While horizontal drilling combined with fracking can cost up to three times as
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`much per foot than drilling a vertical well,17 horizontal wells can produce at rates several times
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`greater than a vertical well.18 The use of fracking technology is expected to increase within the
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`next decade with an estimated
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` percent of natural gas wells employing hydraulic fracturing.19
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`Wellhead Isolation Tools
`
`(8)
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`The high pressures and corrosive fluids used with fracking can degrade or damage
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`important wellhead equipment. As a result, many oil companies use isolation tools that protect
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`the wellhead and the blowout preventer. Oil companies view these isolation tools as a means to
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`save money because isolation tools prevent damage to the wellhead, and some isolation tools
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`increase efficiency when dealing with multiple fracturing stages. The wellhead can be damaged
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`by fracking operations; including potential irreparable damage to the wellhead after being
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`exposed to frac fluids, which are “frequently laden with corrosive acids and abrasive proppants
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`such as sharp sand.”20 Various wellhead isolation tools such as casing savers, wellhead
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`fracturing isolation sleeves, and Stage Frac Tools, have been used in the marketplace in an
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`attempt to address these negative consequences. Each of these tools is discussed below.
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`(9)
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`Before the ‘053 patented technology was invented, other tools known as “casing
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`savers” were often used in an attempt to protect the wellhead components from corrosion,
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`erosion, and abrasion.21 I understand that a casing saver includes a mandrel that is inserted and
`
`17
`
`18
`
`
`16
`“Drilling Sideways – A Review of Horizontal Well Technology and its Domestic Application,” Energy
`Information Administration, Office of Oil and Gas, U.S. Department of Energy, April 1993 at 4.
`“Directional and Horizontal Drilling in Oil and Gas Wells,” Geology.com (accessed:
`http://geology.com/articles/horizontal-drilling/).
`“Drilling Sideways – A Review of Horizontal Well Technology and its Domestic Application,” Energy
`Information Administration, Office of Oil and Gas, U.S. Department of Energy, April 1993 at 4-5.
`“Hydraulic Fracturing Q & A’s,” American Petroleum Institute (accessed: http://www.api.org/oil-and-
`natural-gas-overview/exploration-and-production/hydraulic-fracturing/hydraulic-fracturing-qa).
`See ‘053 patent (Background of the Invention).
`Interview of Dr. Gary Wooley.
`
`19
`
`20
`21
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`5
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`extended from the top of the wellhead down into the casing where it seals off.22 This prior
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`technology did not come without problems. Some advantages and disadvantages of casing
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`CONFIDENTIAL
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`savers are listed below:23
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`Advantages
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`
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`Isolates the wellhead; and
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` Can be installed and removed under pressure.
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`Disadvantages
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`
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`Inefficiencies, costs, and risks associated with rigging up and rigging down the
`tool between every frac stage;
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` No “full bore access” to the casing (i.e., the casing saver restricts the inner
`diameter of the casing string within the wellhead); and
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` The mandrel inner diameter of the casing saver limits the outer diameter of tools
`that can be inserted into the casing string without the costly process of removing
`and reinstalling the casing saver.
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`(10) Some oil companies also used what are considered to be “nontraditional” forms of
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`isolation tools, including “wellhead fracturing isolation sleeves.”24 A wellhead fracturing
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`isolation sleeve is a short piece of metal that has seals at the bottom and the top that an operator
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`inserts into the tubing spool to isolate the tubing spool. A changeover flange also connects the
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`top of the tubing spool to the wellhead fracturing isolation sleeve.25 Some advantages and
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`disadvantages of wellhead fracturing isolation sleeves are listed below:26
`
`
`22
`Interview of Bob McGuire.
`23
`Interview of Dr. Gary Wooley; Interview of Murray Dallas.
`24
`Deposition of Bob McGuire, August 1, 2014, at 92.
`25
`Deposition of Bob McGuire, August 1, 2014, at 92.
`26
`Interview of Bob McGuire.
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`6
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`Advantages
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` Allows full bore access;
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`CONFIDENTIAL
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`
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`Isolates tubing spool (but not wellhead); and
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` Eliminates the inefficiency of rigging down and rigging up the tool and frac lines
`between fracturing stages.
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`Disadvantages
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` Does not fully isolate wellhead;
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` Wellhead valves are not protected from corrosion, erosion, and abrasion during
`fracking operations;
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`
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`In the event of a seal failure during operations, an operator cannot change out the
`seal rapidly, which leads to downtime, inefficient production, and possible loss of
`control of the well;27 and
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` Must run plugs, etc. and remove the wellhead fracturing isolation sleeve before
`maintenance can be performed on the well.
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`(11) Murray Dallas, the inventor of the ‘053 patent, addressed the above shortcomings
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`associated with earlier technologies by inventing a wellhead isolation tool (the “Stage Frac
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`Tool”) to isolate and protect BOPs with a full bore opening into the production casing,28 while
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`also allowing for increased flow rate (relative to a casing saver) and pressure (relative to
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`wellhead pressure resistance with no isolation) during fracturing stimulation in the well, among
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`other things.29 The commercial embodiment of the Stage Frac Tool is intended for use in wells
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`with an internal diameter of 7 1/16” or greater.30 For the reasons discussed below, neither casing
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`savers nor wellhead fracturing isolation sleeves offer all of the features and benefits that the ‘053
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`patented technology offers. The ‘053 patented technology is described in more detail below.
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`
`27
`Deposition of Bob McGuire, August 1, 2014, at 93-94.
`28
`Deposition of Murray Dallas, March 13, 2014, at 142 -143.
`29
`Interview of Murray Dallas.
`30
`Interview of Bob McGuire.
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`7
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`Introduction to U.S. Patent No. 6,179,053
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`CONFIDENTIAL
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`(12) United States Patent Number 6,179,053, titled “Lockdown Mechanism for Well
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`Tools Requiring Fixed-Point Packoff,” was filed on August 12, 1999 and issued on January 30,
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`2001.31 I understand that the challenged claims in this matter are claims 1 and 22, and that
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`substitute claims 28 and 29 have been proposed to replace the challenged claims in the event that
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`they are determined to be unpatentable. I understand that the patented technology at issue
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`introduces a new tool to isolate and protect a wellhead and wellhead components during fracking
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`operations.32 The image below depicts a cross-sectional view of the ‘053 patented tool.33
`
`
`
`
`31
`See ‘053 patent.
`32
`Interview of Murray Dallas.
`33
`See ‘053 patent.
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`8
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`CONFIDENTIAL
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`
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`(13) OSES’ patented Stage Frac Tool provides benefits to the oil and gas industry that
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`are not available through the use of “casing savers” or “wellhead fracturing isolation sleeves.”34
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`OSES’ patented Stage Frac Tool includes a mandrel that seals in the tubing spool, allowing for
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`full-bore access to the casing,35 two separate mechanical lockdown mechanisms,36 and a
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`removable setting tool.37 Through the use of the ‘053 patented technology, the Stage Frac Tool
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`also allows the well operator to leave the tool in place between fracking stages.38
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`(14) According to OSES’ technical expert, Dr. Gary Wooley, some of the benefits of
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`the Stage Frac Tool over other isolation tool technology include the following:39
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`
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`More reliably protects the wellhead from corrosion, erosion, and abrasion
`damage:
`
`
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` Lengthens useful life;
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` Lowers maintenance on wellhead components; and
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`
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`Increases safety by reducing the risk of a blowout.40
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`Casing savers: While casing savers also protect the wellhead from corrosion,
`erosion, and abrasion damages, they may not be as reliable as Stage Frac
`Tools for at least two reasons. First, for casing savers, the seal in the casing
`may be less reliable due to possible corrosion, erosion, and abrasion damage
`in the casing string. Second, casing savers typically need to be removed and
`reinstalled between fracturing stages, increasing the probability of a faulty
`seal.
`
`
`37
`
`
`34
`Interview of Dr. Gary Wooley; Interview of Murray Dallas.
`35
`Interview of Dr. Gary Wooley.
`36
`I understand that the first lockdown (i.e., the flange that bolts onto the tubing head spool) secures the Stage
`Frac Tool to the wellhead assembly. The second lockdown mechanism is attached to the mandrel, can be
`adjusted, and holds it in place during operation. I understand that both lockdown mechanisms are
`necessary for the Stage Frac Tool to operate.
`Interview of Bob McGuire. A removable setting tool allows the Stage Frac Tool to remain in place for an
`extended period of time, which allows you to run wireline, perforating guns, etc. If the setting tool
`remained in place on top of the stage frac tool, access to the wellbore would be obstructed. In addition, a
`removable setting tool allows for reduced costs as one setting tool can service multiple Stage Frac Tools.
`Interview of Bob McGuire.
`Interview of Dr. Gary Wooley; Interview of Murray Dallas.
`Interview of Dr. Gary Wooley.
`Interview of Dr. Gary Wooley.
`
`38
`39
`40
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`9
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`CONFIDENTIAL
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`Wellhead fracturing isolation sleeves: Wellhead fracturing isolation sleeves
`only protect the tubing spool and leave other wellhead components vulnerable
`to corrosion, erosion, and abrasion damage.
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`Eliminates the inefficiency of rigging down and rigging up the tool and frac
`lines between fracturing stages;41
`
`Casing savers: Casing savers do not offer this benefit.
`
` I
`
` understand that eliminating the need to rig down frac lines and pull the tool
`between fracturing stages is a principal distinction between casing savers and
`Stage Frac Tools.42 For this reason, I understand that casing savers are more
`commonly used on jobs with fewer fracturing stages, while Stage Frac Tools
`are more commonly used on jobs with a higher number of fracturing stages.43
`
`Wellhead fracturing isolation sleeves: Wellhead fracturing isolation sleeves
`eliminate the inefficiency of rigging down and rigging up the tool and frac
`lines between fracturing stages.
`
`Allows for “full bore access” by not restricting the inner diameter of the
`casing string;
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` provides the capability to run wireline plugs and perforating guns
`through the tool;
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` allows for substantial time savings between stages;
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` provides the ability to pump at a higher rate than possible with
`conventional tools; and
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` allows for greater flexibility in job design.44
`
`Casing savers: Casing savers do not offer this benefit as they restrict the
`inner diameter of the casing string.
`
`
`Wellhead fracturing isolation sleeves: Wellhead fracturing isolation sleeves
`provide a limited ability to pump at a higher rate than possible with
`
`
`
`
`
`
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`
`
`
`
`
`41
`“Isolation Tools,” Oil States Energy Services Brochure (accessed: http://www.oilstates.com/Products-and-
`Services/Isolation-Tools-1447.html).
`Interview of Bob McGuire.
`Interview of Bob McGuire.
`“Isolation Tools,” Oil States Energy Services Brochure (accessed: http://www.oilstates.com/Products-and-
`Services/Isolation-Tools-1447.html).
`
`42
`43
`44
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`10
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`

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`
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`conventional tools, and allow for some flexibility in job design relative to
`Stage Frac Tools.45
`
`CONFIDENTIAL
`
`(15)
`
`I understand that the ‘053 patent reads on the entire tool, unlike a patent for a
`
`specific component that is part of a larger-multi-component product.46 The image below
`
`provides a depiction of OSES’ Stage Frac Tool:47
`
`
`
`
`
`(16) The features and benefits associated with the ‘053 patented technology have
`
`enabled the patented Stage Frac Tool to achieve commercial success, as demonstrated by the
`
`analysis of financial and market data discussed below.
`
`
`45
`Interview of Bob McGuire.
`46
`Interview of Dr. Gary Wooley.
`47
`“Isolation Tools,” Oil States Energy Services Brochure (accessed: http://www.oilstates.com/Products-and-
`Services/Isolation-Tools-1447.html).
`
`
`
`11
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`

`
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`Stage Frac Tool Share of Wellhead Isolation Tools Marketplace
`
`CONFIDENTIAL
`
`(17) The patented Stage Frac Tool generally can be used in any well (vertical,
`
`horizontal, or directional) that is fracture stimulated.48 However, I understand that there are
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`certain situations in which the patented Stage Frac Tool would not be used on fracture stimulated
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`wells because (i) the well has too small of a casing diameter; (ii) the customer has yet to fully
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`embrace and utilize wellhead isolation tools; or (iii) the customer utilizes a one-stop shop (like
`
`Halliburton) for all of its drilling operations.49 For purposes of this Declaration, I refer to the
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`remaining available wells that are fracture stimulated as the wellhead isolation tool marketplace.
`
`(18)
`
`I understand that customers within the wellhead isolation tool marketplace have
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`the option of choosing a casing saver, a wellhead fracturing isolation sleeve or a stage frac tool.50
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`As discussed earlier, I understand that casing savers may be more economical for jobs with fewer
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`than five fracturing stages, while stage frac tools are likely more economical for larger jobs. As
`
`between stage frac tools and wellhead fracturing isolation sleeves, stage frac tools provide
`
`
`48
`Interview of Dr. Gary Wooley and Bob McGuire.
`49
`I understand that Halliburton bundles its products and services, including its wellhead isolation products.
`Therefore, generally, customers who use Halliburton would not turn to OSES for wellhead isolation tools;
`and customers who use multiple suppliers would not use Halliburton for wellhead isolation tools.
`Interview of Bob McGuire.
`Interview of Bob McGuire.
`
`50
`
`
`
`12
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`insurance against disasters51 and protection from excess charges,52 while wellhead fracturing
`
`CONFIDENTIAL
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`isolation sleeves do not.53
`
`(19)
`
`I have searched for, but have not found, third party data to allow me to determine
`
`the associated market shares for casing savers, wellhead fracturing isolation sleeves, and stage
`
`frac tools. However, OSES estimates that it performs approximately
`
` percent of all stage
`
`frac tool jobs.54 I understand that OSES’ Stage Frac Tools primarily compete with Greene’s
`
`infringing tools and stage frac tools recently introduced by another third party.55
`
`(20) Based on the above, the relative share in the marketplace of OSES’ patented Stage
`
`Frac Tool demonstrates the commercial success OSES has enjoyed as a result of the ‘053
`
`patented technology.
`
`Stinger/OSES’ Stage Frac Tools and Services
`
`(21) Stage Frac Tools with the ‘053 patented technology at issue have enjoyed
`
`tremendous commercial success and profitability with revenues in the hundreds of millions of
`
`dollars and established EBITDA margins over
`
` percent.56 The patented Stage Frac Tools have
`
`also generated
`
` in revenues of related products and services that are related to
`
`52
`
`
`51
`A seal failure on a wellhead fracturing isolation sleeve at best would require that the well be shut down
`while the seal is repaired. At worst, a seal failure could lead to a loss of control of the well. Interview of
`Bob McGuire.
`I understand that wellhead components are designed to function in a production environment and not in a
`fracturing environment. Stage frac tools are designed to protect the wellhead in a fracturing environment.
`For example, the stage frac tool, which isolates and protects the wellhead, is made from materials that can
`better withstand the corrosion, erosion, and abrasion, associated with fracturing (as measured in terms of
`higher Rockwell ratings). Wellhead fracturing isolation sleeves only isolate the tubing spool and not other
`components of the wellhead. As a result, oil companies that use wellhead fracturing isolation sleeves are
`not protected from excess charges relating to the fracturing process such as rebuild costs due to corrosion,
`erosion, and abrasion of wellhead components. Interview of Bob McGuire.
`Interview of Bob McGuire.
`Interview of Bob McGuire. I understand that Halliburton offers its version of a wellhead isolation tool, but
`it seals within the casing and requires the use of Halliburton’s wireline and plugs that are specifically
`designed to be used in conjunction with the tool.
`Interview of Bob McGuire.
`ATTACHMENT 6.0.
`
`53
`54
`
`55
`56
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`
`
`13
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`
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`transportation of the tool as well as products and services that are run through the tool.57 The
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`table below contains a number of specific line items from which revenues are received from
`
`CONFIDENTIAL
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`OSES customers.58
`
`
`
`(22) Moreover, Stage Frac Tool revenues have increased substantially in recent years.
`
`In 2007, Stinger/OSES generated approximately
`
` in net revenues from its Stage
`
`Frac Tools and approximately
`
` in related products and services.59 By 2013,
`
`Stinger/OSES’ revenues had grown considerably (by a factor of more than
`
`) as it’s Stage
`
`Frac Tools generated approximately
`
` in net revenues, with related products and
`
`services net revenues reaching approximately
`
`.60
`
`(23) From May 1, 2006 through December 31, 2013, Stinger/OSES recorded total
`
`Stage Frac Tool net revenues of approximately
`
` from
`
`jobs.61 As discussed
`
`earlier, the patented technology at issue, in turn, has created demand for related products and
`
`
`57
`Interview of Bob McGuire, Vice President of Operations at Accent; Deposition of Bob McGuire, August 1,
`2014, at 28-40.
`Stinger OSES Frac Tool Sales Data.xlsx
`ATTACHMENT 3.0.
`ATTACHMENT 3.0.
`ATTACHMENTS 3.0 and 4.0. This amount excludes taxes. See also Interviews of Bob McGuire and
`Rayburn Ray.
`
`58
`59
`60
`61
`
`
`
`14
`
`OSES' Related Products and Services
`Operator Charge
`Mileage Charge
`Pump Down Charge
`Rig-up Charge
`Remote Valve
`7-way per Use
`7-way Fracturing Head
`Hydraulic Power Unit
`Incomplete Service
`3-way per Use
`Stand-by Charge
`Forced Closure
`3-way Fracturing Head
`Ball Launcher
`5-way per Use
`
`

`

`CONFIDENTIAL
`
`
`
`services. For example, Stinger/OSES’ Stage Frac Tools have generated over
`
` in net
`
`revenues for related products and services from May 1, 2006 through December 31, 2013.62
`
`(24) As shown in the chart below, the trend for Stage Frac Tool and related products
`
`and services net revenues also demonstrates that the ‘053 patented technology at issue has been
`
`increasingly more valuable over time.63
`
`(25) As seen in the chart above, the patented Stage Frac Tool and related products and
`
`services have seen high revenue growth since 2009. More specifically, Stinger/OSES’ net
`
`revenues for Stage Frac Tools and related products and services related to the ‘053 patented
`
`technology have enjoyed a compound average growth rate of approximately
`
` percent from
`
`2009 through 2013.64 This confirms the popularity of the ‘053 patented technology and its value
`
`in the marketplace.
`
`
`62
`ATTACHMENT 3.0.
`63
`ATTACHMENT 3.0.
`64
`
`
`
` ATTACHMENT 3.0.
`
`15
`
`

`

`CONFIDENTIAL
`
`
`
`(26) The average price per job for Stage Frac Tools and related products and services
`
`for the period of May 1, 2006 through December 31, 2013 was
`
`. Over the same period
`
`of time, the average price per job for casing savers and related products and services was
`
`.65 The difference between these two figures demonstrates the substantial value that
`
`customers attribute to the patented technology. Furthermore, as prices per job have increased for
`
`casing savers and related products and services, the number of jobs has dropped – from
`
`
`
`jobs in 2007 to
`
` jobs in 2013. The opposite is true for OSES’ Stage Frac Tools and related
`
`products and services. As prices have increased, so have the number of jobs – from
`
` jobs in
`
`2007 to
`
` jobs in 2013. The increase in number of Stage Frac Tool jobs even as prices have
`
`increased (particularly in light of the opposite effect for casing savers and related products and
`
`services), further demonstrates the commercial success of the ‘053 patented technology.
`
`(27)
`
`In 2007, Stinger/OSES had
`
` Stage Frac Tools available for jobs. These tools
`
`were highly utilized at an average rate of
`
` jobs per tool with average revenues per job
`
`(including related products and services) of
`
` that year.66 By 2013, Stinger/OSES had
`
`increased its Stage Frac Tools available for jobs to
`
`, yet those tools continued to be highly
`
`utilized at an average rate of
`
` jobs per year while revenues per job (including related products
`
`and services) increased to
`
` per job, on average.67 The high utilization of Stinger/OSES’
`
`Stage Frac Tools while revenues per job increased further confirms the commercial success of
`
`the ‘053 patented technology.
`
`(28) Stinger/OSES’ profitability data also confirm the commercial success of the ‘053
`
`patented technology. While Stinger/OSES did not maintain separate margin data for its Stage
`
`
`65
`ATTACHMENT 7.0.
`66
`ATTACHMENTS 3.0 and 5.0.
`67
`ATTACHMENTS 3.0 and 5.0.
`
`
`
`16
`
`

`

`CONFIDENTIAL
`
`
`
`Frac Tools and overall company margins before 2012, Stinger/OSES enjoyed an EBITDA
`
`margin of approximately
`
` percent for its Stage Frac Tools and related products and services
`
`for the period of 2012-2013.68 During the same period, the rest of the company enjoyed an
`
`EBITDA margin that was significantly lower at approximately
`
` percent.69 To put this into
`
`perspective, in 2013, revenues of Stinger/OSES’ Stage Frac Tools and related products and
`
`services represented approximately
`
` percent of the overall company revenues, while
`
`contributing nearly
`
` of the profits (EBITDA).70
`
`Conclusion Relating to the ‘053 Patent
`
`(29) Based on the above analysis, it is my opinion that the unique features and benefits
`
`associated with the patented Stage Frac Tool have enabled the Stage Frac Tool to achieve
`
`commercial success for at least the following reasons:
`
`
`
`
`
`
`
`
`
`
`
`Stinger/OSES’
`marketplace;
`
` percent estimated share of the stage frac tool
`
`Stinger/OSES recorded total Stage Frac Tool net revenues of approximately
`, and approximately
` more in related products and
`services, from
` jobs, from May 1, 2006 through December 31, 2013;
`
`Stinger/OSES’ net revenues for Stage Frac Tools and related products and
`services related to the ‘053 patented technology have enjoyed a compound
`average growth rate of approximately
` percent from 2009 through 2013;
`
`For 2006 through 2013, the average price per job for jobs done using OSES’
`Stage Frac Tools was
`, which is much higher than the average price
`per job for OSES’ casing savers of
` for the same period. While prices
`for both have increased over time, the number of Stage Frac Tool jobs has
`increased and the number of casing saver jobs has decreased.
`
`Stinger/OSES’ Stage Frac Tools continue to be highly utilized even as the
`number of available Stage Frac Tools has increased from
` tools in 2007 to
` tools in 2013 in addition to increases in revenues per job; and
`
`
`68
`ATTACHMENT 6.0.
`69
`ATTACHMENT 6.0.
`70
`
`
`
` ATTACHMENT 6.0.
`
`17
`
`

`

`
`
`CONFIDENTIAL
`
`
`
` percent for
`Stinger/OSES enjoyed EBITDA margins of approximately
`Stage Frac Tools and related products and services for the period of 2012-
`2013, while the rest of the company had EBITDA margins that were
` percent.
`significantly lower at approximately
`
`Respondent’s Proposed Amended Claims
`
`(30)
`
` I have discussed Respondent’s proposed amended claims with Respondent’s
`
`technical expert Dr. Gary Wooley and also with the inventor Murray Dallas. Based on those
`
`discussions, it is my understanding that claim 28 (the proposed contingent substitute for claim 1)
`
`would cover all Stage Frac Tools that have