SIMPLE FIELD

SOLUTIONSFOR HEAVY OIL AND BITUMEN

FRACTALSYSTEMS

February 2018

Forward Looking Statement and Disclaimer

Confidential Business Summary

THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATIONS IN SUCH JURISDICTION. The Confidential Business Summary is being supplied to you solely for your information. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of Fractal Systems Inc. (“Fractal”) as to the accuracy or completeness of the information or opinions contained in the attached document.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of Fractal.

Information for U.S. Residents

This document is confidential and has been prepared and submitted for use in the United States solely in connection with the consideration of the possible investment by a limited group of sophisticated United States accredited investors. The use of this document for any other purpose is not authorized and this document may not be reproduced, transferred to any other person or used without the consent of Fractal.The contents of this document should not be considered to constitute legal or tax advice and each prospective investor should consult with its own legal counsel and advisers as to all matters concerning an possible investment in Fractal. Each investor must rely on its own evaluation of the investment, including the merits and risks involved, in making an investment decision. An offer will only be made when a purchaser properly completes and executes a subscription agreement.

AboutFractal Systems

Fractal Systems Inc. is a heavy oil technology company who develops, patents, and deploys innovative, cost-effective solutions to improve producer margins, de-bottle infrastructure and provide flexibility associated with the transportation of heavy oil.

Fractal Systems Inc. is a private Canadian corporation with offices in Calgary, Alberta and Sherbrooke, Quebec.

Joe Gasca, Chairman• 35+ years of industry experience, most recently serving as

CEO of Ivanhoe Energy• 20+ years in major leadership positions at Texaco & BG Group

Ed Veith, President & COO• 35 years of oil company and engineering company experience• 14 years at Ivanhoe Energy most recently as EVP

Upstream/SVP Canada Projects

Michel Chornet, Director & Technology Advisor• Co-founder of Fractal Systems, Inc. and 20 years of

engineering and technology development experience in energy sector

• Shell and H-Power

Dr. Esteban Chornet, Founder• Inventor of JetShearTM technology & Professor of Chemical

Engineering at Université de Sherbrooke (Québec, Canada)

• Founder of Enerkem and Fractal Systems, Inc.

Experienced TeamWITH PROVEN TRACK RECORD COMMITTED INVESTORS WITH ENERGY EXPERIENCE

Rho Ventures

Braemar Energy Ventures

JetShearEnhanced JetShear + ARP

• Lower transportation costs• Reduced viscosity requires less diluent

• Increase infrastructure utilization• Less diluent frees up pipeline capacity

• Improve product value in Province• Lower discounts

• Reduce GHG emissions• Take diluent out of the system

• Lower capital investment• Viable in todays price environment

IMPROVING OILSANDS SUSTAINABILITY

Fractal Systems Technology PlatformPROVEN AT COMMERCIAL SCALE

o Reduce diluent by 50-60%o Improve product valueo 20-25% more bitumen in pipelineo Successful commercial field

demonstration in 2016/2017o Patent pending application

o Reduce diluent by 40-50%o 15-20% more bitumen in pipelineo Successful commercial field

demonstration in 2014/2105o Product and process patents

in place

JetShear™ Enhanced JetShear™ ARP™

o Reduce TAN < 1.0 mgKOH/go Remove corrosion concerns and

discounts for very high TANo Commercial field demonstration in

2017o Patent pending application

JetShearMarket

Cost Structure• Oil sands must be competitive with other investments around the globe to

capture development capital• Oil sands costs are not competitive at lower oil prices

Transportation Challenge• Most oil sands bitumen goes to the US for refining• Pipelines are now operating at full capacity due to growth in oil sands production• New pipeline projects are having difficulty getting approval from governments

Canadian Oil Sands ChallengesNEW SOLUTIONS REQUIRED TO BE COMPETITIVE

Environmental Concerns• Bitumen has high carbon content – deemed “dirty”• Industry requires new solutions to improve efficiency

and reduce GHGs

Pipeline Transportation

• Once the heavy oil is to the surface, it cools and high viscosity makes transportation difficult

• Producers use costly diluent to blend with the heavy oil to meet pipeline specifications

Diluent is a light hydrocarbon (i.e. typically condensate or naphtha) that is used to “dilute” the heavy oil in order to improve its transportation characteristics (e.g. lower viscosity and density)

Canadian Diluent Market - ~$15 billion in 2014GROWING OIL SANDS PRODUCTION LEADS TO INCREASED DILUENT DEMAND

CAPP-Crude Oil: Forecasts, Markets & Transportation – June 2017 CERI-Oil Sands Supply Costs & Development Projects – February 2017

• Oil sands production totaled 2.4 million b/d (2016)

• Forecast to grow to 3.7 million b/d (2030)

• Diluent demand will increase to over 1.3 million b/d (2035)

• Diluent market of C$30-40 billion (2035)

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C5+/ Condensate (Thermal & Mining)SCO (Synbit/ DilSynbit)C5+/ Condensate (Primary & EOR)ButanesAlberta Oil Sands Diluent Demand - CERI (kb/d)

JetShear Technology Background

The Science

• JetShear uses low severity, hydrodynamic cavitation and mild thermal cracking to structurally modify asphaltene molecules by separating resin groups attached to the asphaltene core

• The rapid change in pressure allows microbubbles to form around nucleation sites

• Kinetic energy from cavitation, converts to chemical energy and modifies heavy oil microstructures and the state of aggregation

• The resulting de-structuring lowers viscosity and bulk density with essentially no change in the volumetric yield

aromatics

Saturates

Asphaltenecore

Resin

Enhanced JetShear Process FlowUTILIZES FRACTIONATION, HEAT, PRESSURE & OFF-THE-SHELF TECHNOLOGIES

1. Initial processing step separates diluent from bitumen

2. Bitumen is sent to the JetShear module, heated to thermal cracking temperatures and pumped through proprietary jet-nozzles where cavitation and mechanical shearing occurs

3. Olefins that are concentrated in the lighter cuts are removed by processing in a low-pressure, catalytic polishing unit with hydrogen

4. Hydrogen is supplied using a licenced hydrogen package or purchased from local hydrogen supplier

5. Sulfur is recovered from by-product gases using a licenced sulfur recovery unit

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3.

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JetShear Location is FlexibleTRANSPORTATION OPTIONALITY ENHANCE PRODUCER ECONOMICS

Terminal

Oilsands Mine

SAGD Project

Refinery

Dilbit

Diluent Return

JetShear

Pipeline or Rail

Pipeline

JetShear

Dilbit

JetShearCommercialization

JetShear Development TimelineDEMONSTRATED TECHNOLOGY DEVELOPMENT

1-30 bopd Bench Scale 300 bopd Pilot Facility

1,000 bopd JetShearCommercial Demonstration Plant

Class 4+ engineering designs with major EPC firm

Canadian and USGC capital cost studies

August 2014

2009-2010Pre-2009 2012-2015 2016-2017 2018Enhanced JetShear + ARP Commercial Demonstration

Patents filed: Heavy oils having reduced total acid number and olefin content

December 2008Patent granted: Treated oils having reduced densities and viscosities

September 2008Patent granted: Process for

treating heavy oils

FID on first commercial facility

Expand business development internationally

Enhanced JetShear Ready for Large-Scale Commercial DeploymentCOMMERCIAL DEMONSTRATION COMPLETED IN 2017

• Technology validation is complete; all milestones for commercial demonstration were met

• Over 225,000 barrels of diluted bitumen have been processed at demonstration facility

• Technology is scalable; commercial-sized nozzles met performance objective

JetShearValue Proposition

Value-Add from Enhanced JetShear + ARPSIGNIFICANT SAVINGS IN THE CURRENT PRICE ENVIRONMENT (53% DILUENT DISPLACEMENT)

7 bbls Bitumen

+ 1.41 bbls diluent

Lower diluent costsLower pipeline tariffs

More efficient pipeline utilizationDramatically lower TAN discounts

Net Value = C$7.50 to C$12.50 per barrel of bitumen*

3 bbls diluent+

Conventional BlendingEnhanced JetShear

* Based on third-party marketing study

• Major International EPC firm developed a Class 4+ engineering study at ~50,000 bpd

– Adjacent to a new or existing SAGD facility

– Assumes tanks, utilities and other off-sites are available

• Significantly lower capital intensity than competing technologies

• Smaller foot print than competing technologies– Approximately 3 acres for a 50,000 bpd

Enhanced JetShear facility

Capex Estimates

Facility Capacity (bpd bitumen)C

apita

l Int

ensi

ty (C

$/bp

d bi

tum

en c

apac

ity)

2Q 2015 Capital Intensity – Ft. McMurray

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

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Enhanced JetShear Capital Intensity vs. Scale

Robust Economics Over Historical RangeATTRACTIVE RETURNS IN CURRENT PRICE ENVIRONMENT

• End-user conceptual 20 year returns for a 50 kbpd size facility at 53% diluent avoidance

– Business model assumed: License

– Capex $5,500 / bbl bitumen

– OPEX $0.92 / bbl bitumen

• Ten year forecast of Net Value Addition* ranges from ~C$7.50/bbl to ~ $C12.50/bbl

• Enhanced JetShear reduces producer risks due to commodity price volatility (heavy oil differential, diluent pricing)

• Significant upside as oil prices rebound0%

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Pre-

tax

IRR

Net Value Addition (after OPEX) C$/bbl

Net Value addition2017

~C$7.50.bbl

* Based on third-party marketing study

JetShear Environmental BenefitACHIEVABLE GHG REDUCTIONS ARE POSSIBLE FOR PRODUCERS WHO USE JETSHEAR IN THEIR OPERATIONS

SAGD: PRODUCTION +

SEPARATION

REFINING + RECYCLING + PROCESSING

Transportation = 10 bbls dilbit7 bbls of bitumen +

3 bbls of diluent

SAGD: PRODUCTION +

SEPARATION

REFINING + RECYCLING + PROCESSING

Transportation = 8.5 bbls dilbit7 bbls of bitumen +1.5 bbls of diluent

Diluent Transport = 1.5 bbls of diluent

Wells to refinery analysis including refinery product distribution

Diluent Transport = 3 bbls of diluent• A life cycle GHG assessment was completed by ClimateCHECK in May 2016*

• Wells-to-refinery basis reductions possible

– 5 to 10% for Enhanced JetShear

• The ClimateCHECK study is being updated to reflect Commercial Demonstration data

– expect report by Q1 2018

Enhanced JetShear at 50% Diluent Reduction

Typical Dilbit at 30% Blend Ratio

* Fractal Systems’ Partial Bitumen Upgrading to Reduce Diluent Required for Transportation and Improve Quality, Environmental Benefits Report for SDTC, May 26, 2016

JetShear Frees Up Oil Export Capacity20-24% MORE BITUMEN CAN BE TRANSPORTED IN EXISTING PIPELINES

Diluent content = 32% Diluent content = 18.1%53% diluent displacement

Conventional Dilbit Enhanced JetShear

Bitumen

Diluent

Diluent volumes are reduced lessening the need for imported diluentand improving infrastructure utilization

IMPROVES OILSANDS SUSTAINABILITYFractal’s JetShear Technology Platform

Lower transportation costs

Increase infrastructure utilization

Improve product valuein Province

Reduce GHG emissions

Lower capital investment

Ready for commercial deployment