R E D U C I N G W E L L D EV E LOP M EN T C O S T S T H R O U G H N OV E L WATE R TR E AT M E N T T E C H N O LO GY A L LOW I N G WAT E R T O B E

R E C YC L E D W I T H O U T L I M I T D U E T O C O N TA M I N A N T B U I L D - U P

WESTERN FRAC VAP

WFV

FONTUS ENVIRONMENTAL CORP.

PRESENTATION TO:

2

TABLE OF CONTENT

I. THE PROBLEM: WATER MANAGEMENT OF FLOW BACK (FRACKING)

II. THE SOLUTION: FracVap TECHNOLOGY – FLOW BACK DISTILLATION

III. STATUS OF WFV: BATCH TESTING OF ENTIRE PROCESS

IV. GOING FORWARD: WAREHOUSE PROTOTYPES (2) AND MOBILE FIELD

UNIT

V. COMMERCIAL PLAN: MOBILE TREATMENT PLANT OPERATIONAL BY END OF

2016

VI. ENDORSEMENTS: EXXON, HUSKY, CULLIGAN, MATRRIX ENERGY......

3

■ Fl ow B ack f rom hydr au l i c f rack i ng i s s i gn ifican t l y con tami na ted , bo th i n To ta l Suspended So l i ds ( TSS) and i n To ta l D i sso l ved So l i ds (TDS) , the l a t t e r t yp i ca l l y i n the o r der o f 100 ,000 PPM;

■ Re lease o f t r ea ted Fl ow Back i s p r oh i b i t ed i n bo th Canada & USA;

■ Tru ck i ng o f c l ean wate r to r emote l oca t i ons and d i spos i ng o f con tamina ted wate r off- s i t e i s e conomica l l y unsus ta inab l e a t cur r en t o i l p r i ce s ; and

■ Fl ow Back i s deep - we l l - i n j ec ted i n some cases w i th s i gn i fican t env i r onmenta l r i sk to g r oundwate r qua l i t y.

THE PROBLEM

4

■ R e m o v e T S S f r o m F l o w B a c k u s i n g c o n v e n t i o n a l , o ff - t h e - s h e l f a n d e n v i r o n m e n t a l l y a p p r o v e d w a t e r t r e a t m e n t t e c h n o l o g y ;

■ R e c o v e r c r u d e o i l f r o m fl o w b a c k u s i n g c o n v e n t i o n a l o ff - t h e - s h e l f A P I ( d e n s i t y - b a s e d ) t e c h n o l o g y ;

■ R e d u c e T D S l e v e l s f r o m a r o u n d 1 0 0 , 0 0 0 P P M t o 1 0 , 0 0 0 P P M u s i n g c o n v e n t i o n a l o ff - t h e - s h e l f fl o c c u l a t i o n t e c h n o l o g y t o m e e t p u r i t y c r i t e r i a i n a d v a n c e o f r e s i n t a n k s f o r r e m o v e o f s p e c i fi c i o n s t o m i n i m i z e c l e a n i n g c y c l e s f o r r e s i n s ;

■ R e d u c e T D S f r o m 1 0 , 0 0 0 P P M t o l e s s t h a n 5 0 P P M t h r o u g h fl a s h e v a p o r a t i o n p r i o r t o e n t r y i n t o r e - c o n fi g u r e d c o o i n g t o w e r e q u i p m e n t f o r c o n d e n s a t i o n o f v a p o r i n c o n d e n s a t i o n c o i l s , a n d r e - u s e o f d i s t i l l a t e i n f r a c k i n g o p e r a t i o n a n d w e l l c o m p l e t i o n ; a n d

■ L o w e r w e l l c o m p l e t i o n c o s t s b y C d n $ 6 0 0 , 0 0 0 p e r w e l l .

THE SOLUTION

5

Mobile FracVap Plant

6

Novelties of FracVap

■ Latent heat from the well entering the Frac Vap is captured by a plate and frame heat ex-changer, stored in a thermal bank and used throughout the process;

■ CO2 generated from flocculation step lowers pH from 11.5 to about 8.5 in advance of ion exchange resins;

■ Application of Purolite’s Mixed Bed and Specific Ion Exchange Resins to remove general and specific ions from solution;

■ Re-Configured Cooling Tower from USA Manufacturer: Use of Pall Filters to achieve water quality polishing efficiencies ≈ reverse osmosis

(requiring psi of 30 rather than 1200 psi required for RO)

Adapt cooling tower equipment used in A/C applications for building towers to recover water from back flow produced from hydraulic fracking as distilled water vapor – as pure H2O

Recover water from water vapor as liquid H2O for recycling and reuse in fracking process. No limitation to number of times water is recycled as quality is constant ≈ 100% pure.

7

Novel Steps in FracVap Process

Absorption Refrigeration Process Garry to name

8

Steps in FracVap Process

a) SOLIDS REMOVAL• HYDRO-CYCLONES• CENTRIFUGE• DRYING OF SOLIDS

b) OIL RECOVERY• API SEPARATION• SELF-CLEANING

ACTIVATED CARBON

c) FLOCCULATION• LIME & SODA ASH• LATENT HEAT• DRYING OF SOLIDS

d) ION EXCHANGE• CO2 – PH REDUCTION• MULTIPLE STEP

RESIN TREATMENT

TSS REMOVAL, OIL RECOVERY & TDS REDUCTION: 100,000 - 10,000 PPM

FLO

W

BA

CK

FE

ED

Stage 1

e) MICRO-FILTRATION• MULTIPLE FILTRATIONS• PALL FILTERS –

EFFICIENCIES SIMILAR TO REVERSE OSMOSIS AT SIGNIFICANTLY LOWER PSI

f) FLASH EVAPORATION OF H2O• MICRO-PARTICLES

DEPOSITED ON TUBES ARE RECOVERED VIA PATENTED PROCESS

g) CONDENSATION OF H2O• CONDENSATION OF

DISTILLED WATER FOR REUSE IN FRACKING (CONDENSATION COILS)

REDUCTION OF TDS FROM 10,000 PPM TO 0 PPM

COOLING TOWER: DISTILLATION & CONDENSATION OF H2O

Stage 2

CONVENTIONAL TSS REMOVAL & MINERAL SALT FLOCCULATION

H2O DISTILLATION USING RE-DESIGNED COOLING TOWER

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FracVap Flow Sheet

Condensation of H2O

Solids Removal

Oil Recovery

Flocculation

Ion Exchange

Micro-Filtration

Flash Evaporation

Solids Dryer Dried SolidsA

Crude OilB

Liquid H2OC

Latent Heat

CaO/Na2CO3

CO2 / H2SO4

Make-Up Heat

Back Flow

Fracking Operation

Fertilizer/ Dried Waste for Disposal

Solids from condenser tubes

Micro-particles

Self-cleaning product

Mineral Salts

TSS

10

WFV’s Three Products

WFV produces three (3) products:

A) Solids (dry): Combined solids from centrifuge, resins, filters and cooling tower tubes are dried in a chemical drier.

B) Crude Oil: Returned to client to off-set service cost of water treatment (≈10 bbl/day @ 1.325 m3/minute).

C) Distilled H2O: Condensed H2O is returned to fracking operation for unlimited number of cycles (no contaminant build-up).

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Equipment SuppliersNote: Most are locally supplied, 3 are sole-sourced and 1 is re-designed

STAGE EQUIPMENT SUPPLIERS NEW/USED

TSS REMOVAL HYDRO-CYCLONES, CENTRIFUGE, ETC.

CHINESE SUPPLIER (Cdn$ 80,000/unit compared to $ Cdn$ 750/unit in Alberta)

NEW OR USED

OIL RECOVERY API SEPARATION SYSTEM ISO-THERM INC. NEW OR USED

FLOCCULATIONREACTORS, SETTLING TANKS, CENTRIFUGE, DRYER

NUMEROUS NEW OR USED

ION REMOVAL RESINS & RESIN TANKS PUROLITE NEW

MICRO-FILTRATION

MIXED BED & MICRO-FILTRATION PALL FILTERS NEW

WATER DISTILLATION

USED COOLING TOWER AND STAINLESS STEEL TUBES

BALTIMORE AIRCOIL COMPANY and various Canadian Suppliers

USED (NH3-corroded tubes are removed)

WATER QUALITY CONTROL

IN-LINE TDS MONITORS, pH METERS, ETC. NUMEROUS NEW

MAKE-UP POWER GENSET NUMEROUS USED

MOBILE PLANTCONTAINERS (3) , SEMI FLAT-BED TRUCK, PUMPS, PIPING

NUMEROUS USED

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Major Equipment

Jar Testing Equipment

Decanter Centrifuge API Separation System

Jar Testing Equipment

Garry to name Chemical Drier

Sand Filters Micro-Filters (Pall) Cooling Tower (Tubes)

13

■ Process f r om so l i ds r emova l t o m i nera l so l i d s floccu la t i on has been demons t r a ted a t l ab - sca l e i n ba tch te s t s , ach iev ing a 90% r educt i on i n TDS.

■ Alber ta d r i l l i n g co mpan y con t rac ted C u l l i gan to ver i f y da ta on Fr acVap Pr ocess . Ve r i fica t i on was success fu l .

■ Effluen t f r om r es i n ex change tanks was t rea ted i n r e -des i gned coo le r t ower ach i ev i ng d i s t i l l ed H2O l eve l s o f pur i t y i n vapor l eav ing co o l i ng tower (B a tch Tes t s ) .

■ Paten ts have been fi l ed f o r r e s in s teps i n s tage 1 and a l l o f S tage 2 o f Fr acVap Pr ocess .

.

Status of WFV

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■ B u i l d a 3 5 G P M ( 1 / 1 0 t h o f M o b i l e P l a n t c a p a c i t y ) Wo r k i n g P r o t o t y p e ( f r o m A p r i l u n t i l M a y o f 2 0 1 6 ) i n a w a r e h o u s e ;

■ C h a r g e c l i e n t s C d n $ 1 0 0 k f o r 3 0 - d a y d e m o n s t r a t i o n o f F r a c Va p ’ s t r e a t m e n t o f fl o w b a c k u s i n g c l i e n t s ’ w a s t e w a t e r ;

■ B u i l d a n d c o m m i s s i o n M o b i l e P l a n t ( f r o m J u l y u n t i l S e p t e m b e r, 2 0 1 6 ) e a r n i n g C d n $ 2 5 7 K / m o n t h ( a p p r o x ) ;

■ B u i l d s e c o n d Wo r k i n g P r o t o t y p e ( f r o m N o v e m b e r u n t i l D e c e m b e r o f 2 0 1 6 f r o i n d u s t r i a l w a t e r t r e a t m e n t d e m o n s t r a t i o n s ; a n d

■ R e c o v e r y o f i n v e s t m e n t c a p i t a l b y M a r c h o f 2 0 1 7 .

Commercial Plan

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Warehouse Prototype Mobile Plant

Treats 35 GPM (0.132 m3/minute);

Water is heated to temperature encountered in fracking operation;

Clients are charged Cdn$ 100K for a 30-day 24-hour demonstration of FracVap system;

Second Prototype shares control room with first;

Operating staff of first plant run the second prototype; and

Second prototype is used to treat industrial water sources.

Treats 350 GPM (1.32 m3/minute);

Client pays for all chemical reagents and utilities;

Oil is returned to the client without charge;

Client is charged Cdn 8.50/m3 for treatment of flow back plus approximately Cdn$ 0.83/m3 for reagents after subtraction for recovered oil;

EBITDA is Cdn$ 4.67/m3; and EBITDA is Cdn$ 357,597/month.

WFV’s Business Model: Terms, Conditions & Assumptions

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Projected First Year Financials (April 2016 – April 2017

Financial Item2016 2017 TOTALS

(Cdn$)Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb MarINVESTMENT                          Warehouse Prototype  Capital ($120,1

75)($120,17

5)           ($120,175)

($120,175)        

Working Capital ($80,000)

($252,000)           ($80,000

)($80,000

)        

Sub-Total ($200,175)

($372,175) $0 $0 $0 $0 $0 ($200,17

5)($372,17

5) $0 $0 $0  Mobile FracVap Plant  Capital      

($396,262)

($396,262)

($396,262)              

Working Capital       ($104,000)

($104,000)

($104,000)              

Sub-Total       ($500,262)

($500,262)

($500,262)              

Total Capital Investment

($200,175)

($372,175) $0 ($500,26

2)($500,26

2)($500,26

2) $0 ($200,175)

($372,175) $0 $0   ($2,645,487

)REVENUE                          Working Prototype     $100,00

0$100,00

0$100,00

0 $100,000$100,000$100,000$100,000$200,000 $200,000 $200,000  Mobile FracVap Plant             $257,597$257,597$257,597$257,597 $257,597 $257,597  

Total Revenue $0 $0 $100,000

$100,000

$100,000

$100,000

$357,597

$357,597

$357,597

$457,597

$457,597

$457,597

$2,845,581

EBITDA (Cdn$) ($200,175)

($372,175)

$100,000

($400,262)

($400,262)

($400,262)

$357,597

$157,422

($14,578)

$457,597

$457,597

$457,597 $200,094

1st Warehouse Prototype

Mobile Plant

2nd Warehouse Prototype Recovery of

capital in 12 months

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OPEX Cdn$/year Cdn$/day Cdn$/m3Service Charge Paid by Client Revenue for WFV (Cdn$/m3)

Cdn/m3 % Cdn$/m3 %Operators (4) $ 180,000 $ 493.15 $ 0.26 Not Applicable   -$0.26  Supervisors (4) $ 180,000 $ 493.15 $ 0.26 Not Applicable   -$0.26  Management $ 905,000 $ 2,479.45 $ 1.30 Not Applicable   -$1.30  Other (contracted) $ 150,000 $ 410.96 $ 0.22 Not Applicable   -$0.22  WFV's Plant Consumables

Make-Up Energy $ 438,000 $ 1,200.00 $ 0.63 -$0.63 7% Not Applicable  Carbon $ 50,000 $ 136.99 $ 0.07 -$0.07 1% Not Applicable  

Resin $ 50,000 $ 136.99 $ 0.07 -$0.07 1% Not Applicable  Cao $ 50,000 $ 136.99 $ 0.07 -$0.07 1% Not Applicable  

Na2CO3 $ 50,000 $ 136.99 $ 0.07 -$0.07 1% Not Applicable  Refrigerant (if necessary) $ 50,000 $ 136.99 $ 0.07 -$0.07 1% Not Applicable  

WFV's Non-Labor-based OPEX       Not Applicable -$2.03 -44%WFV's Labor-based OPEX       Not Applicable -$1.80 -39%

OPEX TOTAL (Cdn$) $ 2,103,000 $ 5,761.64 $ 15.79 -$0.99   -$3.83  

Service charge (WFV)     $ 8.50 -$8.50 91% $ 8.50 182%

Recovery of Crude Oil*   $ 300.000   $ 0.16 -2%    

TOTAL (Cdn$) -$9.33 100% $4.67 100%             

Back Flow Treatment Rate              

* Assuming a flow back treatment rate of

1.325 m3/minute        

1908 m3/day                       

Crude Oil Recovered from Flow Back            

** Assuming a crude oil recovery rate of

10.0 bbl/day         $ 30.00 Cdn$/bbl        

 

Unit Cost & Revenue Estimates

* Estimated from batch test results

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Endorsements

Company Contact Position StatusChevron Rudy Tamayo Water Engineer

Husky  Roy Guan

ExxonMobil Mark Mcouat Working Prototype

MATRRIX Robert Van Bostelen VP, Operations

Culligan  Chris Larson, Technical Sales

 XTO Energy Canada Darrell McOuat Water

Management JJ Crew Collaboration

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Letter of Support: XTO Energy Canada

Subject: Western Frac VapFrom: "Mcouat, Darrell /C" <darrell.mcouat@exxonmobil.com>Date: Mon, May 04, 2015 11:22 amTo: "spencer@westernfracvap.com" <spencer@westernfracvap.com>Cc: "Taylor, Jamie A" <jamie.a.taylor@exxonmobil.com>, "Bruce,Dean F" <dean.bruce@exxonmobil.com>Spencer ,  As per our conversation, XTO Energy Canada  has expressed interest in the water conversion process that Western Frac Vap has introduced to us , your ability to covert flow back frac fluid to meet the AER “Test and Release” criteria. This would allow XTO to store the converted flow back water in larger and more economical storage containment and reuse this fluid for additional fracs.

XTO has offered Western Frac Vap the opportunity to set up their equipment on a couple of XTO’s locations to execute  a pilot with their mobile equipment . If this technology meets the expectations of the Producer there would be a potential for a long term relationship with Western Frac Vap.Thanks and look forward to working with you in the future  Darrell McOuat Water Management XTO Energy Canada Suite 400321-6th Ave SWOffice 403.766.1057Cell      587.439.4887