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SafeBlend Technologies, under pressure to set a price for his company's environmentally
friendly fracturing nuid additi part of its upcoming contract with its biggest client, Bristol Natural
Gas(BNG). The contract was due to expire at the end of 2011: both SafeBlend and BNG were
eager to negotiate terms now contract that would establish pricing for the 2012 calendar year.
3. Site cleanup Cleanup includes treating and/or removing/recycling the used fracturing fluid(at
times, contaminated) from the site once it has returned to the surface. A fracturing fluid's
composition differs slightly for each customer, in response to Bite variables. In 2003, the vast
majority of shale gas explorers used facu ng nud that was composed of waer and ale rock and
the sand sand: the pressurized, water-based liquid forced open cracks in gas could emerge.
The remainin, of enhance production granules kept the newly formed cracks open, so that
fracturing fluids were made up of chemical additives designed to capacity. Additives served
distinct purposes. One type of additi might prevent bacteria growth in the fractures, while
another could prevent well-casing corrosion. The most notable environmental concern was the
threat that chemicals and gases released during the hydraulic fracturing process pos o nearby
ground and drinking water Chemical contamination could come from underground leaching, or,
more likely, fr an above-ground spill
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In September 2009, Sharp scheduled a follow-up meeting with BNG's vice president of
chemical engineering at BNG's Texas headquarters. Sharp called Dudley immediately after the
meeting am, we were wrong to assume BNG toas only mildly cunous about our product. BNG
just confided that a lawsuit uns filed by a property owner close to one of BNG's fracturing sites.
The property owner facturing fuid. BNG is tery claims his groundwater is contaminated with
chemicals from BNG's concerned-not only about the financial liability should they lose the case,
but also, and perhaps more importantly, about negative publicity. BNG is expanding, and
starting next August 2010, they expect new uells at a rate of 15 per quarter Each well requires
8 million gallons of water and 40,000 gallons of additites. BNG is sincerely interested in our
product because it's the only one around nght now. I think they would purchase large volumes
of it. and in short order, if ue could satisy their demand. As you know, our current capacity is
just 10,000 gallons per month. Encouraged by the positive response from BNG, Dudley and
Sharp decided to take a risk. They felt fracturing fluid additives offered the highest short-term
growth potential for their company. The also believed that, in the longer term. SafeBlend could
potentially provide additional products and services to the industry. As a result, they agreed to
make BNGs business the company's priority They pursued also a second, slightly smaller(in
terms of revenue) company, Adley oil and Gas(ACG), whose interest in additives was equally
high. (Sce Exhibit 2 for projected annual fracturing fluid requirements by customer Said Dudley
In the fall of 2009, political sensitivity surrounding fracturing and groundwater contamination
was high. Videos were being posted on social networking sites that shcued residents near
fracturing sites lighting ther faucets on fire. The videos fueled a publicity nightmare for thoe in
the sude gas industry I knew that BNG, and companies like BNG, tunted to do uhatever thy
oould, now, to minimize future damage. It was a unique opportunity to grow our business-f ue
acted quickly. Securing a Financial Commitment Dudley sent two of his senior chemical
engineers to central Texas in October 2009. He put them in long-term housing and tasked them
with working alongside BNG chemical engineers to figure out how to modify and produce what
BNG needed by the third quarter of 2010. Said Dudley lt seemed that BNG tranted to spare no
expense to guarantee quality and efectiveness. When of tuo ingredients that toould deliver
essen presented with tially the same result. BNG consistently chose the higher-priced option;
they wanted to be absolutely sure that no shortcuts were taken in terms of eficacy or toxiaty