Visit us online at nuwaveindustries.com or call 844-583-3600 to learn more.
For more information about NuWave Industries see page 12.
IN THIS ISSUE
Feature
2016 Product Review
A look at some of the technologies
that are helping the industry stay
safe and be compliant.
By Jennifer Delony - pages 18 through 21
In Every Issue
Letter from the Publisher – page 2
OILMAN Contributors – page 2
OILMAN Online // Retweets // Social Stream – page 4
Downhole Data – page 4
Calendar of Events – page 13
— OILMAN PRIDE —
Photos from Oil & Gas History – pages 7, 9 and 11
— OILMAN COLUMNS —
Steve Burnett: Oilman Cartoon – page 3
Timothy McNally: Ambitious Engineer at Exxon Offers Positive Message for Industry – page 10
Tim Sharp: Hydro-cutting Tool Slices Costs On Well Abandonments – page 12
Joshua Robbins: The Art of Business Development – page 15
Richard Perkins: Valuable Safety Training Available Online – page 17
Alex Mills: Future Looks Better, But Industry Moves Cautiously – page 23
Jason Spiess: Energy Scene – pages 32 and 33
Marsha Vigil: Best Practices for Cost Control and Capital Management – pages 34 and 35
Mark Stansberry: Energy Messages & The Media – page 36
— NEWS—
News at a Glance – pages 24 and 25
Oklahoma News – page 26
Texas News – pages 28 and 29
Louisiana News – pages 30 and 31
Oilman Magazine / September-October 2016 / OilmanMagazine.com
11
As we explore technology in this issue, I thought about how rapidly
technology changes in industries such as nance, legal, publishing, and retail.
For energy, specically oil and gas, the negative oil economy has forced
companies to innovate and pursue product research and development. Being
creative in your eld is always a noble endeavor. However, many wonder why
the oil and gas industry waited until the drop in oil prices to accelerate ideas
for product improvement. During the high barrel oil prices there appeared to
be plenty of resources to fund R&D, yet the emphasis was on solely getting
oil to the market. At OILMAN, we’re trying out new techniques to deliver content to our readers
while also discovering new ways to bring value to our advertisers. Some of our initiatives will work
and many may not. We know part of the innovation process is to lter out ideas, services and
products that morph into a bad experience for our customers. Keeping up with the latest tools in
the publishing industry and what our competitors offer their customers is key to our survival. With
R&D and innovation comes training and knowledge transfer. As with all new products and ideas,
they need to be introduced to an eager team in order to successfully present to customers. Training
is a key component and the downturn has provided oil and gas professionals the time to learn
new skills, which in turn will place a company in a stronger advantage over competitors. To stay
competitive in today’s economy, companies need to think about new products on a consistent basis
and improve their service where appropriate. Customers are expecting it and the company with the
best tools of the trade will win every time.
MAGAZINE
SEPTEMBER — OCTOBER 2016
PUBLISHED BY
Oilman Magazine, LLC
P.O. Box 771872
Houston, TX 77215
(800) 562-2340
OilmanMagazine.com
PUBLISHER
Emmanuel Sullivan
publisher@OilmanMagazine.com
(800) 562-2340 Ex. 5
EDITOR
Jennifer Delony
DIGITAL CONTENT MANAGER
Tim McNally
GRAPHIC DESIGNER
Kim Fischer
CONTRIBUTORS
Don Briggs— LOGA President.......
Mark Stansberry— Chairman of The GTD Group.......
Joseph DeWoody— President of Clear Fork Royalty, an
oil & gas royalty investment company located in
Fort Worth, Texas.......
Steve Burnett— CrudeOilCalendars.com....
Story Sloane III— The Sloane Gallery in Houston,
Texas (281) 496-2212).......
Paul Flessland— Photographic Artist,
PaulFlesslandPhoto.com.......
Jason Spiess
Joshua Robbins
SUBSCRIPTIONS
OilmanMagazine.com/subscribe
ADVERTISING
(800) 562-2340 Ex. 1
advertising@OilmanMagazine.com
OilmanAdvertising.com
© Copyright 2016 by Oilman Magazine, LLC. All rights reserved.
Reproduction without permission is prohibited. All information in
this publication is gathered from sources considered to be reliable,
but the accuracy of the information cannot be guaranteed.
Image credits — The Sloane Gallery, Houston, TX; 123rf.com..........
LETTER FROM THE PUBLISHER
CONTRIBUTORS — Biographies
Don Briggs
Don Briggs is the President of the Louisiana
Oil and Gas Association. The Louisiana Oil
& Gas Association (known before 2006 as
LIOGA) was organized in 1992 to represent the
Independent and service sectors of the oil and
gas industry in Louisiana; this representation
includes exploration, production and oileld services. Our
primary goal is to provide our industry with a working
environment that will enhance the industry. LOGA services
its membership by creating incentives for Louisiana’s oil &
gas industry, warding off tax increases, changing existing
burdensome regulations, and educating the public and
government of the importance of the oil and gas industry in
the state of Louisiana.
Mark A. Stansberry
Mark A. Stansberry, Chairman of The GTD
Group, is an award-winning author, columnist,
lm producer, radio talk show host and 2009
Western Oklahoma Hall of Fame inductee.
He has been involved in the oil and gas
industry for over 39 years. He is currently
serving as Chairman of the Board of the Gaylord-Pickens
Museum/Oklahoma Hall of Fame, Vice Chairman of the
Board of Regents of the Regional University System of
Oklahoma, Board of Directors of OKC Port Authority,
Board of Governors of the Recording Academy/Grammys
Texas Chapter, Lifetime Trustee of Oklahoma Christian
University and Board Emeritus of the Oklahoma Governor’s
International Team. He has served on several private and
public corporate boards.
Jason Spiess
Jason Spiess is an award winning journalist, talk
show host, publisher and executive producer.
Spiess has worked in both the radio and print
industry for over 20 years. All but three years of
his professional experience, Spiess was involved
in the overall operations of the business
as a principal partner. Spiess is a North Dakota native,
Fargo North Alumni and graduate of North Dakota State
University. Spiess moved to the oil patch in 2012 living and
operating a food truck in the parking lot of Macís Hardware.
In addition to running a food truck, Spiess hosted a daily
energy lifestyle radio show from the Rolling Stove food truck.
The show was one-of-a-kind in the Bakken oil elds with
diverse guest ranging from U.S. Senator Mike Enzi (WY) to
the traveling roadside merchant selling ags to the local high
school football coach talking about this week’s big game.
Joshua Robbins
At Beachwood Marketing Group, our mission is to
market oil and natural gas properties in the most
cost effective and efcient way. We strive to provide
excellent leadership and unparalleled service for
each of our clients. Josh has been instrumental in
dening Beachwood’s market leading solutions and
has overseen the company’s expediential growth. Josh is also an
accomplished writer on the acquisition and divestment market
and a speaker and presenter at conferences. He continues to keep
his focus on the strategic direction of Beachwood Marketing
Group and its expansion into new markets.
Paul Flessland
Paul Flessland is an editorial, event and portrait
photographer based in Fargo, North Dakota.
Featured in over fteen regional and national
publications, Flessland is passionate about visually
telling the story of the Bakken’s impact on
North Dakota and the nation. Visit his website at
paulesslandphoto.com
Joseph DeWoody
Joseph P. DeWoody (@jpdewoody) is the president
of Clear Fork Royalty, an oil and gas royalty
investment company located in Fort Worth, Texas.
Clear Fork Royalty works with accredited investors,
trusts and family ofces to provide portfolio access
to oil and gas mineral rights and royalties to hold
for long term investment through various direct investment
vehicles. Joseph was selected by Oil and Gas Investor Magazine
as a winner of the Top 20 under 40 Award, and by TIPRO and
Texas Monthly Magazine as a Texas Top Producer. Joseph is a
member of the Young Presidents’ Organization (YPO). He was
appointed by Texas Governor Rick Perry to a six year term on
the Texas Board of Professional Geoscientists. He serves on the
Board of Directors for the National Stripper Well Association
and the Texas Alliance of Energy Producers.
Steve Burnett
I was raised in a small West Texas town where
the school mascot is a roughneck. Growing up
with a roughneck as the town symbol, how could
I not spend most of my adult life working in
the petroleum industry? I started working in the
oilelds age 16. In Texas you had to be 17 with a
signed minors release from your parents, but my parents were
glad to keep me working. I had been working since my rst job
working on a commercial elephant garlic farm at age 12. By
the time I reached 16, I had enough work experience to prove
I knew how to hold my own on a work crew. Anybody whose
parents survived the great depression can attest to the fact that
their children learn the value of a solid work ethic.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
2
Emmanuel Sullivan
Publisher, OILMAN Magazine
Oilman Magazine / September-October 2016 / OilmanMagazine.com
33
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
4
FOR THE WEEK ENDING August 26, 2016
DIGITAL DOWNHOLE DATA
Connect with OILMAN anytime at
OILMANMAGAZINE.com and on social media
SOCIAL STREAM
facebook.com/OilmanMagazine
RETWEETS
@OilmanMagazine
#OilmanNEWS
Stay updated between issues with weekly reports
delivered online at OilmanMagazine.com
Louisiana: 42
Last month: 46
Last year: 71
Oklahoma: 62
Last month: 60
Last year: 105
Texas: 237
Last month: 214
Last year: 386
U.S. Total: 489
Last month: 463
Last year: 877
OIL RIG COUNTS
*Source: Baker Hughes
Brent Crude: $48.10
Last month: $40.76
Last year: $47.97
WTI: $48.60
Last month: $41.54
Last year: $45.29
CRUDE OIL PRICES
*Source: U.S. Energy Information Association (EIA)
Per Barrel
Louisiana: 4,908,000
Last month: 4,938,000
Last year: 5,161,000
Oklahoma: 13,291,000
Last month: 12,690,000
Last year: 13,065,000
Texas: 99,168,000
Last month: 97,492,000
Last year: 105,800,000
U.S. Total: 275,725,000
Last month: 268,415,000
Last year: 291,625,000
CRUDE OIL PRODUCTION
*Source: U.S. Energy Information Association (EIA)
Barrels per month
Louisiana: 156,276
Last month: 153,598
Last year: 165,771
Oklahoma: 212,615
Last month: 204,871
Last year: 213,529
Texas: 626,026
Last month: 611,925
Last year: 677,396
U.S. Total: 2,422,023
Last month: 2,359,605
Last year: 2,468,460
NATURAL GAS
MARKETED PRODUCTION
*Source: U.S. Energy Information Association (EIA)
Million Cubic Feet
Per Month
The Permian Basin International Oil Show, Inc.
Phone: 432.367.1112 • Fax: 432.367.1113
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Mark Your Calendars to Attend
October 18 - 20, 2016
Ector County Coliseum and Fair Grounds
Odessa, TX
STANDING TALL
Oilman Magazine / September-October 2016 / OilmanMagazine.com
6
1 OF 3 HUMBLE & ESSO OIL STATION PUMP 1937
Pride
Photo courtesy of The Sloane Gallery – Houston, Texas.
These images and more are for sale and can be found
by visiting www.SloaneGallery.com
or calling 281-496-2212.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
7
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2 OF 3 HUMBLE OIL GAS PUMP 1930s
Pride
Photo courtesy of The Sloane Gallery – Houston, Texas.
These images and more are for sale and can be found
by visiting www.SloaneGallery.com
or calling 281-496-2212.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
9
Oilman Magazine / September-October 2016 / OilmanMagazine.com
10
OILMAN COLUMN
Nate Burkhalter, a three-time American
Ninja Warrior contestant, is a prime
example of how not giving up will
eventually yield positive results. Nate
works full time for Exxon as a production
engineer, but he also nds the time to
train for the gameshow American Ninja
warrior. In addition, Nate is dedicated to
volunteering his time to help struggling
communities around the world. Juggling
all three of these roles is certainly a
challenge, but Nate manages to balance
his lifestyle in a way which ensures
success in everything he does.
Nate’s interest in volunteer work
began six years ago when he became
involved in various faith-based volunteer
opportunities such as medical missions,
home-building, and disaster-relief. After
a few years of working with various
organizations, Nate became familiar with
a group called Living Water International.
Living Water International is a non-prot
organization that works to enable access
to clean drinking water for areas of the
world that are in desperate need. The
organization was started in Houston,
TX in 1990, and it has since blossomed,
having completed a total of more than
17,000 water projects.
When Nate found out about Living
Water, he realized instantly that his
“subsurface skills and engineering skills
would t right in” with the drilling of
fresh water wells. In addition to assisting
with fresh water drilling operations in
areas of the world that need it, Nate
now advocates and fundraises for these
projects in order to raise awareness for
people in need. American Ninja Warrior
is one outlet where Nate is able to share
his story and spread the word about
Living Water International and the many
people in need throughout the world.
American Ninja Warrior is a competitive
game show that attracts an array of
competitors to attempt to complete the
notoriously difcult obstacle courses
which demand tremendous agility, speed,
and strength. Nate told OILMAN
Magazine that when a friend showed
him the game show via a YouTube clip,
Nate “instantly was hooked” and decided
“I’m doing that.” He found a local gym
in Houston that prepares athletes to
compete on the show and has since been
attempting to make the cut for the show
for the past three years.
After two years of not making the
show despite intense training and
camping out for days with dozens of
other contestants, Nate nally hit a
breakthrough this year. He successfully
completed the course and was a featured
spotlight on the show, a privilege not all
competing candidates receive. He was
also chosen to compete on a new version
of the show, called Team Ninja Warrior.
Nates inspirational story of perseverance
is something that he wants to share with
all his fellow employees in the oileld.
“For the oil environment, we are in right
now, we see a lot of people that have lost
their jobs...a lot of people are kind of
losing hope.” Nate shared his story with
Oilman
with the hope that others will see
the power of perseverance. “I’ve gone
through two years of losing or failing at
my dream of being on this show... and I
didn’t give up. I want to remind people
that whatever it looks like for them... try
to persevere.”
Ambitious Engineer at Exxon Offers
Positive Message for Industry
By Timothy McNally
3 OF 3 SINCLAIR GAS STATION IN HOUSTON TEXAS - 1934
Photo courtesy of The Sloane Gallery – Houston, Texas.
These images and more are for sale and can be found
by visiting www.SloaneGallery.com
or calling 281-496-2212.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
11
Pride
Oilman Magazine / September-October 2016 / OilmanMagazine.com
12
OILMAN COLUMN
Cut-and-cap well abandonment procedures
are generally dangerous, time and
resource intensive processes relying on
cooperative weather, and they become
more complicated the worse the weather
becomes. A new, innovative technological
approach to an old oil and gas problem is
to employ a hydro-powered-cutting tool
to cut and separate the wellhead while still
underground, leaving a small environmental
footprint.
High-pressure Water Cuts Though
Casing
This hydro tool, mixed with a natural
abrasive, cuts into the well casing from
the inside. A process that takes only 20
minutes to an hour based on casing layers
and cement. The tool ts directly into the
well casing and is lowered to the desired
separation point. After the precise and quick
cutting is nished, the entire casing is pulled
out of the ground.
A regulatory approved venting cap is
compression t to the casing strings and
seals the well shut. Leaving only a small
hole, little backll is required to cover it.
Because there is minimal excavation, there
is no slumping around the wellsite months
later. Additionally, only two trucks are
needed; one ll truck with mini excavator
and the cutting tools truck.
This hydro-cutting system is so quick and
efcient that the amount of abandonments
that can be performed exponentially
increases to an average of six—up to
nine in good weather—per day. General
abandonment methods usually require a full
day to cap one well, depending on weather.
Traditional Methods Are Costly and
Time Consuming
Using the standard abandonment process, a
deep, wide, sloped hole around the wellhead
must be excavated to allow access. After
excavation, there is a laborious cutting
process that entails using a welding torch to
cut casings and separate lining cement by
hand. Welding requires a hot work permit
and in certain situations may place workers
in a dangerous environment.
After the well cap is sealed and secured,
the large pit around the well must be lled;
however, it cannot be backlled with the
same excavated earth. The dirt needs to
be removed by truck for cleaning and
new ll must be brought in. This process
requires the use of ve to six trucks to
move earth around and equipment costs
can run over for several days. Furthermore,
this traditional method requires multiple
returns to the wellsite over several years to
compact and ll in the excavation site due
to slumping.
Workers Are Safer, No Flames Required
With a reduced process prole, dangerous
situations, such as welding in tight spaces
and potential cave-ins, are eliminated.
Additionally, there is no exposure to
harmful gases or chemicals, as well as no
open ame or sparking tools. By using the
hydro-cutting tool, dangerous re hazards
are removed from the equation.
Minimize Environmental Footprint
With minimal ground disturbance and no
soil contamination from within the well, the
hydro-cutting process is environmentally
friendly. After the abandonment process,
the time it takes for the area to return to its
natural state is dramatically reduced.
Wellsites that have used this process have
received reclamation certicates within
six to eight months — compared with
traditional excavation methods, where soil
settles and requires backlling year after
year. This relling prolongs the time it takes
to get a reclamation certicate to three to
ve years—dragging out extra costs during
a time when the industry must prevent
unnecessary expenditures.
Hydro Cutting Only Provides Benets
The cut-and-cap abandonment process
has been rethought through the use of
a hydro-powered cutting tool. This new
method expedites the process and reduces
equipment and associated costs, while
reducing risk to workers and minimizing
the effect on the environment. In these
times of slashed budgets, the industry needs
to optimize its processes or face nancial
hardship. At your next well abandonment,
make the process an afterthought, rather
than an ongoing costly challenge.
Tim Sharp is a co-owner of NuWave
Industries Inc. He can be reached at
844-583-3600.
Hydro-cutting Tool Slices Costs
On Well Abandonments
By Tim Sharp
Oilman Magazine / September-October 2016 / OilmanMagazine.com
13
CALENDAR OF EVENTS
is Partnering
With The Following Events
Well Site Facilities Onshore 2016
The Westin Galleria Houston
5060 W Alabama St
Houston, TX
September 28-29
http://facilities-design-onshore.com
Oklahoma Oil & Gas Expo
Oklahoma State Fair Park
3001 General Pershing Blvd
Oklahoma City, OK
October 6
http://okoilexpo.com
West Texas Oil and Gas Convention
Horseshoe Arena
2514 Arena Trail
Midland, TX
October 18-19
http://roselandoilandgas.com
3
rd
Annual Offshore Well
Intervention Conference
Double Tree by Hilton Greenway Plaza
6 Greenway Plaza
Houston, TX
October 19-20
http://interventiongom.offsnetevents.com
Clean Gulf
Tampa Convention Center
333 S Franklin St
Tampa, FL
November 1-3
http://www.cleangulf.org
Permian Basin International Oil Show
Ector County Coliseum Complex
4201 Andrews Hwy
Odessa, TX
October 18-20
http://www.pboilshow.org
Oilman Magazine / September-October 2016 / OilmanMagazine.com
14
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THE MAGAZINE FOR LEADERS IN AMER ICAN ENERGY
Questions? Call or email anytime
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Background photo courtesy of The Sloane Gallery in Houston, TX.
Working With Tongs - West Texas 1930s.
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
15
We hear the same problems at every
meeting: “We see all of the same properties
that appear on these bid sites, but those
properties aren’t what we are looking for.
And, on the off chance they are, we have
to ght with 25 other companies to get the
property. We refuse to overpay for assets, so
we end up losing out on these opportunities.
How can we nd oil and gas properties that
t our acquisition prole, and not have to
worry about our competition forcing the
price up? How can we build our company
operations without spending hours in
data rooms, only to nd that the property
we want has a low NRI or astronomical
expenses?”
I know you’ve asked these questions in this
pricing environment as well.
Beachwood focuses primarily on off-market
assets, so we tend to see deals form from
inception. We talk with nearly 1,600 oil and
gas rms a month, and live in the A & D
market day in and day out, discovering new
deals every single day.
We have found that, through relationship
building and core client management,
nding deals has turned into an art form.
We call it the Art of Business Development.
Each day I am asked about my background,
my schooling, my area of expertise. Do
I come from the land, engineering or
operational side of the business? Truth is,
I have to work with them all. We all do. In
order to really get the deal accomplished,
you have to know and relate to each member
of the organization.
Business development is more than a card at
a conference or a hand shake at a meeting.
Business development, at its heart, is not
about your company’s business, but the
business you are working with. So many
companies try to sell their widget or service
without understanding the solution it
provides. Knowing the people with whom
you are working not only identies the
need for your product or service, but also
provides a solution. The same is true when
you are buying assets in this market.
As a lead generating organization, focusing
entirely on off market deals in the oil and
gas market, Beachwood is in a constant state
of business development. We know that the
best way to nd out what an organization
is interested in (whether buying or selling)
is to let them tell us. Listening to the issues
of your company, client or prospect will
change the approach of your business
strategy. Don’t just connect on LinkedIn or
like a status on Facebook and call it Business
Development. Engage on multiple levels
with multiple people, identifying each issue
and subsequent solution.
Discovering deals in this market is not the
issue we are facing. There are more deals
now than there have been in the past year.
The issue is the ability to close those deals.
We see the buyer and seller disconnection
every day. Overcoming this obstacle can
be accomplished, but you have to look at
your organization honestly. You have to
know where your company is going (both
internally and externally), be able to focus on
your core market and then provide value to
deals that t into your acquisition prole.
With all of these pieces laid out, contacts
can be made, refreshed or built upon. Oil
and gas is a small community, offering a
multitude of opportunity at every level.
And being nearly 20% into the 21st century,
business development doesn’t look the same
as it has over the past 100 years. We are able
to communicate faster, travel quicker and
uncover opportunities through technology.
Use these as strengths and revamp your
network.
The Art of Business Development requires
research, commitment and a strong sense
of direction. We live in a world that is
becoming more and more connected.
With that knowledge we can uncover
more and more opportunities. Those can
be buying oil assets, selling equipment,
nding mineral deals, decreasing operational
costs, increasing revenues or streamlining
processes.
The Art of Business Development
By Josh Robbins
OILMAN COLUMN
Oilman Magazine / September-October 2016 / OilmanMagazine.com
16
November 1-3, 2016 • Tampa, FL
Tampa Convention Center
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
17
OILMAN COLUMN
Tighter budgets have led many companies
to curtail training expenses in an effort
to save money for their organization. No
one knows this better than those who are
managing budgets for safety training in the
oil and gas industry. But the need for safety
training persists and may be greater than
ever moving forward. Some experts predict
that things may begin to turn around for
the industry in 2017 and that there may
be a shortage of skilled workers because
many of those displaced by the downturn
have moved on to other industries. Training
is crucial to the success and safety of
inexperienced workers that may be coming
into the industry.
LWCC is committed to partnering with its
policyholders to help keep employees safe
and healthy on the job. As an added value
service, LWCC provides an online training
solution to its policyholders at no additional
cost. Training courses are available 24 hours
a day, 7 days a week on any computer with
internet access. Employees can complete
training at their leisure, eliminating the
time constraints of classroom training.
Additionally, the student is not required to
complete the entire course in one sitting.
Only the nal test must be completed in one
sitting.
LWCC partners with UL Pure Safety to
offer this safety training and management
system to its policyholders. It works for
businesses and organizations of all sizes and
industries. Currently we are streaming 500
different courses and many of our oileld
clients use them to meet important safety
requirements. Some of the available courses
for example include global harmonization,
rst aid, re prevention, lockout/tagout and
fall prevention.
Certicates can be printed upon
completion of each course and presented
to the employee. A spreadsheet can also be
supplied to assist with the tracking of each
student’s progress and for recordkeeping.
The average cost of these courses is $30
per course but LWCC offers them to our
policyholders free of charge. Since 2010,
our policyholders have taken advantage
of this offer by having their employees
complete over 54,410 courses to date. More
importantly, this training increases workforce
knowledge of safe work practices.
We have received a strong, positive response
from our customers who use online training.
In addition, we have studied claims costs
for our top ve participating policyholders.
As a group, these businesses have reduced
their claims cost signicantly and they have
continued to utilize this resource well after
seeing those results.
This training along with solid safety
management practices has helped the group
achieve this level of success.
LWCC’s team of Loss Prevention
consultants located throughout the state
can visit your work environment and
partner with you to help determine if
your organization could benet from
participating in our online training program.
Additionally, LWCC also offers a Mobile
Training Safety Center outtted with laptops
that will travel to your site to deliver online
training. This eliminates the need for an
employee to travel away from the site to
receive training and is another cost savings
for our policyholders.
To demonstrate this commitment to you,
our loss prevention services are available
to our policyholders at no additional
charge. LWCC provides many other free,
value-added resources to its policyholders,
including an extensive video lending library,
sample forms and programs, defensive
driver simulators, safety meeting guides, and
monthly webinars.
Richard Perkins is LWCC safety and loss
prevention manager. He has worked in
safety and risk management for 22 years
and has a long tenure with LWCC’s loss
prevention department, working as a
loss prevention representative and most
recently as the loss prevention outreach
coordinator. As safety & loss prevention
manager, he manages 10 consultants who
provide loss prevention services to LWCC’s
policyholders.
Valuable Safety Training Available Online
By Richard Perkins
Oilman Magazine / September-October 2016 / OilmanMagazine.com
18
Oilman Magazine / September-October 2016 / OilmanMagazine.com
18
FEATURE
2016 Product Review
A look at some of the technologies
that are helping the industry
stay safe and be compliant.
By Jennifer Delony
Photo Credit: Andrey Guryanov - www.123RF.com
Oilman Magazine / September-October 2016 / OilmanMagazine.com
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
19
FEATURE
Throughout the year, we dedicate a signicant
amount of column inches in
Oilman
to the
policies and market dynamics that drive the
fortunes of companies in the oil and gas
industry. In this issue, we’re taking a time-out
to acknowledge some of the products that
allow the industry to not only thrive, but also
adjust to those ever-changing market forces.
The companies that provide products and
services to the oil and gas sector are in a
constant state of innovation. Their work
improves processes and makes the eld safer
and more productive.
In the offshore market, a growing attention to
risk has placed innovation in the spotlight.
General Electric (GE) earlier this year
introduced a series of offshore solutions
designed to lower costs and reduce downtime
in offshore operations. GE looked to other
industries to inspire resiliency and efciency
in its new products.
Among the solutions introduced by GE at
the Offshore Technology Conference (OTC)
in Houston was the SeaPrime blowout
preventer (BOP) control system, which
translates electrical controls from the surface
to hydraulic controls subsea. GE said that the
system, which is designed to operate as deep
as 12,500 feet below sea level, is the rst fault-
tolerant design with the ability to re-route
hydraulic functions while remaining subsea.
GE received a 2016 Spotlight on Technology
award from the OTC organizers. The
award recognizes OTC participants who
embody the conference mission to advance
scientic and technical knowledge for the
safe development of offshore oil and gas
resources.
A BOP is a special valve that seals, controls
and monitors an oil and gas well to prevent
the release of oil or gas in an uncontrolled
environment – a.k.a., a blowout. There
are different kinds of BOPs; a ram-
type BOP, for example, uses a pair of
opposing steel plungers, or rams, to
control oil or gas ow.
GE’s product release during
the conference followed
the April 29 publication in
the
Federal Register
of the
U.S. Bureau of Safety and
Environmental Enforcement’s
nal rule for oil and gas and
sulfur operations in the Outer
Continental Shelf –BOP
systems and well control.
The so-called well-control rule
adopts reforms for well design,
well control, casing, cementing,
real-time well monitoring and
subsea containment. BSEE’s rule is a
response to signicant loss-of-well-control
incidents, such as Deepwater Horizon in 2010
and Walter Oil and Gas in 2013.
According to BSEE’s nal rule, the
Deepwater Horizon incident resulted in the
release of 134 million gallons of oil, which
spread over 43,300 square miles of the Gulf
of Mexico and 1,300 miles of shoreline
in several states. The Walter Oil and Gas
incident resulted in a re that lasted 72 hours
and a $60 million nancial loss. BSEE
said that the incident occurred “in
part due to the crew’s inability
to identify critical well control
indicators and to the failure of
critical well control equipment.”
BSEE added that “the
investigations that
followed the Deepwater
Horizon incident, in
particular, documented
gaps or deciencies in the
OCS regulatory programs
and made numerous
recommendations for
improvements.”
Product and service providers
now are moving to respond
to the well-control rule and
Subsea accumulator modules at Trendsetter’s facilities in Houston. Courtesy of Trendsetter. Trendsetter designed Arctic capping stack and subsea
accumulator module. Courtesy of Trendsetter.
FEATURE
Oilman Magazine / September-October 2016 / OilmanMagazine.com
20
supply operators with the solutions they need
to move forward in compliance.
Houston-based Trendsetter Engineering is
addressing the rig-specic requirements of
the rule by offering its Subsea Accumulator
Modules (SAM) for near-term compliance
purposes.
New BOP accumulation and ow
requirements in the rule include:
• § 250.734(b)(2) — Have the accumulator
capacity located subsea…; The
accumulator capacity must:
• Operate each required shear ram, ram
locks, one pipe ram, and disconnect
the LMRP
• Have the capability of delivering uid
to each ROV function via ying leads
• § 250.734(a)(4) — The ROV must be
capable of opening and closing each
shear ram, ram locks, one pipe ram,
and LMRP disconnect under MASP
conditions as dened for the operation.
According to Mike Cargol, vice president of
oileld rentals and services for Trendsetter,
subsea BOPs have similar hardware to surface
BOPs.
A surface BOP stores hydraulic pressure in
what is basically a large balloon, and in an
emergency, the operator can press a button
and that hydraulic pressure closes the rams,
cuts the pipe and seals the well at surface, he
said. Subsea, he added, the accumulators are
strapped to the original BOP body and they
sit as an integral part of the BOP assembly on
the sea oor.
Before the new well control rule, the
accumulators were built into the BOP under
existing standards, and they had enough
accumulator volume to keep minimum
functions on the BOPs.
“When the new well control rule came out, it
added requirements for subsea BOPs,” Cargol
said. “Not only do operators now need to
have additional function and capability, they
also have to have the additional accumulator
volume to be able to complete the functions
of those rams.”
Having additional accumulator volume is not
usually very easy, but Cargol likened the SAM
to a battery pack that can be added to a cell
phone.
“The SAM allows an operator to continue
using the BOP as is, then take the SAM unit
and set it on the sea oor, plugging it into the
BOP and increasing the ‘battery life’ on the
sea oor so they can be compliant with the
new well control regulations,” Cargol said.
The units are good for up to 10,000 feet
below sea level, but the greater the depth,
the less usable volume there is in an
accumulator. More accumulators are needed
to accommodate that loss, Cargol said.
Using the SAM is not a permanent x. At
some point in the future, operators are going
to have to modify BOPs
“Using the SAM now allows operators to
continue moving forward with equipment as
is with no downtime,” he said.
Products Showcase
Churchill Drilling Recognized for
Hydraulic Pipe Recovery Tool
Oil and gas engineering rm Churchill
Drilling Tools won the 2016 Elevator Award
for its HyPR HoleSaver hydraulic pipe
recovery tool.
HyPR HoldSaver is the rst hydraulic pipe
and hole recovery system that ensures against
stuck pipes. The HyPR jetting dart uses
drilling mud to cut through a sub in under two
hours.
Sponsored by the Royal Bank of Scotland, the
Elevator Awards are given to companies and
individuals for innovative market leadership.
Churchill Drilling Tools in August also
was shortlisted for the Innovation Award
for the HyPR HoleSaver. The Innovation
Award category attracted 14 entries, with six
companies shortlisted for the prize.
“We are really pleased that our tools have
been recognised for this prestigious award
Mike Churchill, CEO, Commercial Director, Churchill Drilling Tools (left); Anke Heggie, Company Growth Support Director,
Scottish Enterprise; Andy Churchill, Chairman, Technical Director, Churchill Drilling Tools.
Trendsetter’s subsea accumulator module. Courtesy of Trendsetter.
FEATURE
Oilman Magazine / September-October 2016 / OilmanMagazine.com
21
as it reects
our continued
commitment to
innovation and technical
excellence,” Churchill Drilling
said in a statement.
Go to circsub.com
BIW Launches First-of-
its-kind Seven-Contact
Wellhead Outlet
Irvine, Calif.-based ITT Corp’s
BIW Connector Systems
brand this year launched
a seven-contact wellhead
outlet to connect safely
and reliably to monitoring
equipment in oil and gas
production wells.
The company said that the outlet
was designed for the harsh under-
ground conditions experienced in convention-
al and steam ood wells, and is the rst of its
kind for the upstream production market.
“In recent years, monitoring tools have
become more sophisticated, and single
conductor instrument cables are increasingly
being replaced with multi-conductor cables,”
John Dutil, VP and general manager, ITT
BIW Connector Systems, said in an April
14 statement. “Our new feedthru will help
customers achieve smarter, more efcient
well management while protecting valuable
equipment like electric submersible pumps.”
According to the company, the smart well
feedthru is the rst multi-pin wellhead
outlet to offer interconnect capabilities for
tubing encapsulated cables with up to seven
conductors. The feedthru, which offers
improved data transmission through the
pressure barrier, also includes a unique visual
safety indicator that provides a visual warning
if high pressure is detected within the outlet
housing and prevents disassembly in unsafe
conditions.
Featuring National Pipe Thread Taper (NPT)
ttings for easy installation on top of the
wellhead bonnet or on the side of the bowl,
the smart well feedthru utilizes glass-to-metal
seals and gold plated contacts to provide
reliable pressure blocking and electrical
performance. Its higher temperature rating
makes it a suitable solution for both steam
oods and conventional wells, and a separate
surface cable allows for easy cable disassembly
during workovers.
Go to ittbiw.com/locator
HIPOWER Debuts Generator for
Specialized O&G Applications
Lenexas, Kan.-based HIPOWER SYSTEMS
in July debuted its HRNG 95 T6 gaseous
generator designed to power new, more
efcient oil and gas industry pumps.
Capable of full rated-load acceptance in one
step, the HRNG 95 T6 can run on both
natural gas and liquid propane and switch
between both fuels based on availability.
“The HRNG 95 T6 offers the fuel efciency
and operating exibility that oil and gas
companies seek with maximum reliability
and durability,” HIPOWER President Rafael
Acosta, said in a July 12 statement. “Such
features as dual-fuel capability and an optional
gas scrubber will be especially attractive to
them.”
To meet the control demands of remote
oil and gas sites, HIPOWER chose a digital
control panel with manual and automatic start
and stop features, programmable automatic
functions and local and remote control.
Go to hipowersystems.com
Weatherford Deep-Set Safety Valve
Achieves V1 Rating
Houston-based Weatherford International in
July said that its new model WUDP-10 deep-
set safety valve was certied to V1 standards
under the American Petroleum Institute (API)
Specication 14A.
The valve is designed for deepwater
applications and is effective at depths in
excess of 12,000 feet. In addition, because it
operates independent of tubing pressure, the
valve can be set in shallow applications.
The tubing-retrievable valve uses conventional
hydraulic functionality to provide long-term,
reliable operation that is not dependent
on nitrogen storage. The simple design
minimizes leak paths and incorporates a heavy
power spring for fail-safe closure.
“The WUDP-10 deep-set valve is one
element in a larger portfolio of V1- and V0-
rated completion technologies for use in deep
water,” Mark Hopmann, VP of completions,
Weatherford, said in a July 13 statement.
“Together, these integrated technologies
create a toolbox of modular solutions for
operators looking to increase efciency and
reliability on offshore rigs.”
Go to weatherford.com
Pressure sealing compression glass and 9 AWG 16 contacts.
Courtesy of ITT BIW Connector Systems.
HIPOWER Systems 95 T6 portable natural gas generator. Courtesy of
HIPOWER SYSTEMS
7-conductor wellhead outlet. Courtesy of
ITT BIW Connector Systems.
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
23
While economic conditions in the domestic
oil and gas industry have improved since
February, many executives have decided to
move cautiously into the last half of 2016.
Crude oil prices increased from $27 in
February to almost $50, and natural gas is
up from $2 per thousand cubic feet (mcf) to
roughly $2.75 on the NYMEX for 30-day
delivery.
The industry has made big strides in adapting
to lower crude prices by cutting costs as
much as 40% and improving productivity,
according to a report by Wood Mackenzie.
The report said shale now makes up the bulk
of the 9 million barrels per day (bpd) of new
oil it considers commercially viable, based on
an assumption of Brent oil prices averaging
about $60 per barrel. That is 1.5 million bpd
more than last year, and higher than any
point since 2009, the report said.
U.S. oil production is down seven straight
months and recently dropped below the
9-million-barrel mark for the rst time in
nearly two years.
The U.S. pumped 8.9 million bpd in April,
according to recently released stats from the
U.S. Energy Information Administration.
That leaves output at a 20-month low and
down by nearly 8% from April 2015, the best
month for U.S. oil production since 1971.
The decline is the result of a decision by
OPEC to continue production at current
levels and further creating an oversupply of
crude oil on the international market. But
OPEC has hardly dealt the U.S. oil boom
a death blow. Production is still twice what
it was in 2008 and there are early signs of
a rebound thanks to the rally in oil prices.
Goldman Sachs recently predicted American
production will continue declining this
year, but then resume growing in 2017 and
beyond.
The U.S. is sitting on 264 billion barrels of
oil reserves, more than Saudi Arabia, Russia,
or any other country on the planet, according
to Rystad Energy.
There are signs the deep freeze in oil-
industry spending is beginning to thaw.
Chevron Corp., Exxon Mobil Corp.
and several partners recently committed
$37 billion to expand an oil project in
Kazakhstan known as Tengiz, one of the
biggest investments since crude prices
collapsed two years ago.
BP PLC also gave the green light to a
multibillion-dollar gas export expansion
complex. It follows the U.K. oil giant’s
announcement in June that it is fast-tracking
a major offshore gas discovery in Egypt.
Italy’s Eni SpA is moving ahead on an Egypt
eld as well.
Since the start of 2015, Chevron and other
big oil rms have slashed their budgets by
a quarter—exceeding $30 billion overall—
and cut more than 30,000 jobs to endure a
prolonged period of low prices.
Independents have started to implement
exploration efforts onshore U.S. and in the
Gulf of Mexico.
Volatile oil and natural gas prices have
accelerated planning by energy executives
to change their business models, according
to KPMG Global Energy Institute’s annual
survey of U.S. senior energy executives.
Of more than 150 executives responding,
94% said commodity pricing coupled with
the regulatory environment will require
signicant changes to their business models
in three to ve years. Executives said their
top organizational priorities for the next two
years are developing new growth strategies
and implementing changes to their business
models.
Nearly 40% believe Brent crude oil prices
will stabilize during 2017 although 26%
believe this will happen by yearend 2016.
Brent prices are expected to average less
than $50/bbl for 2016, said 88% of those
surveyed. In addition, natural gas prices are
viewed as continuing to stay low for the
remainder of 2016.
When asked about mergers and acquisitions,
92% of respondents expect to be involved
in a merger or acquisition in two years, with
38% saying asset acquisitions are more likely
than acquiring an entire company.
Slightly more than half of oil and gas
executives surveyed, about 51%, said
they believe restructuring or bankruptcies
primarily will drive acquisitions.
Alex Mills is President of the Texas Alliance
of Energy Producers. The opinions
expressed are solely of the author.
Future Looks Better, But
Industry Moves Cautiously
By Alex Mills
Photo Credit: Rossella Apostoli - www.123RF.com
OILMAN COLUMN
NEWS AT A GLANCE...
Oilman Magazine / September-October 2016 / OilmanMagazine.com
24
Fracking Cannot Be Regulated
by Federal Government without
Approval
By Tim McNally
A judge in the District Court of
Wyoming recently rejected the Obama
administration’s proposal for regulating
hydraulic fracturing (fracking) on federal
lands. The proposed rule is viewed as
an overextension of the administration’s
ability to enforce laws.
Judge Scott Skavdahl, who was
nominated in 2011 by Obama, said that
the rule “is in excess of its statutory
authority and contrary to law.” Congress
has not given the Interior Department
the right to regulate fracking. In fact,
a 2005 law instituted by Congress has
prohibited the Interior Department
from interfering with most aspects of
fracking. Without Congress approval, the
proposed rule cannot be enforced.
Certain environmental regulatory
bodies have been attempting to assert
their authority over fracking for a long
time, and this ruling by Judge Skavdahl
is the nal strike that denies them the
right do so. Jeffrey Reeser, a partner at
Sherman & Howard’s Denver ofce,
said of the ruling: “This is the latest in
a series of federal court decisions that
have invalidated attempts by the federal
[U.S. Environmental Protection Agency]
and [the Bureau of Land Management
(BLM)] administrations to extend federal
regulatory oversight over lands in the
West.”
Despite a rather popular belief, the
process of fracking is not unregulated,
as the regulations originate from state
oversight rather than federal. Neal Kirby,
a spokesperson for the Independent
Petroleum Association of America said
that the “decision demonstrates BLM’s
efforts are not needed and that states
are — and have for over 60 years been
— in the best position to safely regulate
hydraulic fracturing.”
Furthermore, the idea that fracking is
harmful to the environment is looked
at with skepticism by some experts. Jay
Lehr, Science Director at The Heartland
Institute, a free-market think tank,
said that “we have been hydraulically
fracturing wells since 1947, with more
than a million performed to date. Not
a single proven case of groundwater
pollution has occurred as a result, and
it likely never will because of the great
drilling depths required, which go
well below the shallow aquifers where
drinking water supplies come from.”
Despite the administration’s persistent
belief that fracking is harmful to the
environment, Skavdahl said that this
was a nonissue and that his ruling was
based solely on the fact that Congress
did not authorize federal regulation of
fracking. His ruling did not consider if
the process of fracking is good or bad
for the environment because that was
not the issue at hand.
The ruling is expected to be appealed by
the government, which could possibly
send it to the Supreme Court after it is
examined in a federal appeals court.
Is Oil Market Poised for a Continued
Rebound or Another Downfall?
By Tim McNally
The current conditions in the oil market
lead many analysts to believe that the
price of oil can rise into the $70’s just
next year. However, others are not so
optimistic regarding a smooth and swift
recovery. Due to increased oil stockpiles
and heightened production levels, there
could be another steep decline in the
commodity’s price.
When listening to some analysts,
the possibility of an oil price jump
seems inevitable. Indeed, 2017 seems
positioned to be the year in which oil
will be consistent in its rally. Continually
falling production in the U.S. and steadily
increasing demand should create a solid
foundation in the market for the oil price
to rise persistently. Other analysts believe
that the oil price will see a steep drop in
the third quarter of 2016 before reaching
the promised land of recovery.
Despite a considerable decline in the
amount of oil produced in the U.S., most
investors are skeptical of the solidity
of the price rebound for a number of
reasons. Tim Evans of Citi Futures
Perspective told
Bloomberg
that “while
U.S. production looks weak, there’s
only been a modest decline in U.S.
inventories.” Inventory levels remain
at decade-high levels, and oil imports
into the U.S. are 12% higher than last
year. The U.S. Energy Information
Administration had predicted a higher
drop in inventories than the 2.2 million
decline that was actually seen, indicating
the overall rebalancing of the market
could take longer than most expect.
Additionally, Canada has been revamping
its oil production, since it was stied by
wildres, and Russia’s oil production for
the rst two quarters of 2016 was 5%
higher than last year. Data provided by
Bloomberg shows that the 25% increase
in Iranian production this year nearly
entirely offsets any decline in production
from the U.S.
Furthermore, OPEC, failing to reach
any sort of agreement on stiing the
cartel’s production, has consistently been
increasing production, further ooding
an already saturated market. Stephen
Schork, president of Schork Group Inc.,
properly summed up the situation when
he told Bloomberg: “The problem is that
OPEC more than makes up for every
barrel of lost U.S. production.”
It is inevitable that the market will,
at some point in the future, become
rebalanced due to the demand for oil
evening with the supply, but before
reaching that point the price will likely
see more turmoil in its recovery.
Suppliers Must Adapt to Maintain
Innovation
By Tim McNally
In order to avoid losing innovative
progress without going insolvent,
companies are nding it prudent to
partner up to foster a creative yet
affordable environment. National
NEWS AT A GLANCE...
25
Oilman Magazine / September-October 2016 / OilmanMagazine.com
25
Oilwell Varco (NAV) and GE Oil and
Gas announced an agreement earlier
this month that focuses on developing
solutions for Floating Production Storage
and Ofoading (FPSO) vessels.
By combining the resources of both of
these well-known companies, FPSOs
should become more versatile and
adaptable to unique situations.
“We can materially improve deepwater
production economics by industrializing
the supply chain and standardizing
complex interfaces between our
complementary topside equipment,” Clay
Williams, CEO of NOV, said in a July 7
statement.
Drillers and producers within the oil
industry have seen massive cost-cutting
efforts and initiatives for efciency in
order to achieve protability in a low-price
environment. However, the suppliers of
these producers and drillers also undergo
shifts in the way they operate. In addition
to cost-cutting, they must also offer
discounts or slash prices so that they may
be seen as a competitive supplier.
During times of a downturn, suppliers
sometimes nd it necessary to cut
down on R&D expenditures. Although
this is effective from the cost-cutting
perspective, it is more of a nuisance for
drillers and producers, who must innovate
their own processes and operations in
order to optimize productivity. These
costs simply add to the burden operators
already experience.
When suppliers cease innovating their
products, it can actually make them
less competitive. Of course, the cost
can be seen as an additional strain on
operations. But in an industry where every
technological advancement can make a
massive difference to the bottom-line,
suppliers must consider whether they
can offer more value by consistently
innovating or by offering the same goods
at a lower price. In the short term, the
latter might seem like a good idea. In
the long-term, however, there are very
detrimental side effects, such as decreased
competitiveness and a lack of interest
from buyers, who seek the latest tech in
the eld.
By focusing on digital solutions, NAV and
GE will update the way FPSOs function
and are monitored.
“Digital solutions will add even more
value to the agreement,” Lorenzo
Simonelli, President and CEO of GE
Oil and Gas, said in the statement.
“Digitization has become not only a
competitive differentiator but increasingly,
a necessity to help our customers make
their businesses stronger long-term.”
GE Oil and Gas and NOV have set a
clear path for themselves to remain a
strong, consistent supplier of reliable and
technologically advanced goods.
Multiple mergers, including FMC and
Technip, Schlumberger and Cameron, and
various others, are meant to further this
goal of efcient and affordable innova-
tion. By combining resources and stream-
lining processes, these companies are
ensuring their future success by offering
optimal solutions to their clients.
Companies May Incur Shortage of
Skilled Workers
By Tim McNally
Around 350,000 workers within the
worldwide oil and gas industry have been
let go in the two years since the oil price
has collapsed. The drop has severely
affected the entire world economy, and
it has caused many companies to declare
bankruptcy. In the U.S., no state has been
hit as hard as Texas, which has had 99,00
jobs cut, about 28% of the total global job
loss so far.
The industry may run into issues in
the future when companies begin to
scale back to size and start hiring back
workers. A lack of skilled workers could
soon be the prominent issue with which
the industry must grapple. With such
large numbers leaving the oil and gas
workforce, it is unsurprising that there
may be a shortage of workers in the
industry in the months ahead.
In North Dakota, there are many fruitful
wells that are waiting to be harvested. In
March, there were nearly 1,000 drilled
but uncompleted wells in the state. Prices
might not be high enough to begin such
endeavors now, but when companies do
decide to return to these sites they might
have trouble nding fracking crews to do
the work. Two years ago there were 45
fracking crews in North Dakota. Now
there are only eight, according to Reuters.
A problem has occurred because
employees of oil and gas companies,
once they are let go, have trouble nding
new work in the industry. Clearly not a
lot of companies are putting effort into
their recruiting and hiring interests right
now. Consequently, many of these ex
oil-industry workers have been forced
into new industries. The solar industry has
been one of the most popular destinations
for laid-off oil employees.
Attempting to lure new skilled workers
into a presently dragging industry will
be an interesting obstacle for companies
to overcome. Les Csorba, a partner at
Heidrick & Struggles, said in an interview
with Houston Public Media that “There
is going to be within the next, I think,
six months to a year a real competitive
war for the best and the brightest in this
industry.”
A further loss of skilled employees
will accompany the retirement of the
experienced generation within the oil
industry. Csorba stated that “You are
seeing the baby boomer generation
retiring, so you have an aging population
within the energy sector…you are seeing
an increased demand for technical
competence and expertise.”
But who is going to ll that gap? It might
be a challenge for companies to nd
experienced skilled workers to replace
the outgoing groups. Oil and gas rms
are going to have to work hard to assuage
employees’ concerns about job security,
the stability of the industry, and one’s
ability to rise within the company.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
26
OKLAHOMA NEWS AT A GLANCE...
Board Members Leave Williams after
Vote to Keep CEO
By Tim McNally
The lack of approval for a merger between
Williams and Energy Transfer Equity (ETE)
has caused a string of problems for Williams
after the announced failure. The merger
failed because ETE pulled out of the plans,
and now there is an apparent division on
the Williams board, which seems to have
been a fracture that needed a nal tremor to
completely separate the board.
Those that did not fully support the merger
include the CEO Alan Armstrong, which
caused much outrage from certain board
members, who questioned Armstrong’s
ability to lead. Six directors on the board
for Williams consequently resigned from
their posts after the board voted not to
remove the current CEO. Among those who
resigned were Frank MacInnis, chairman
of Williams’ board, and two hedge fund
activists, Eric Mandelblatt and Keith Meister.
Seven remaining members on the board
have been outspoken about their support for
Armstrong.
“Since Alan was appointed CEO in 2011,
Williams has become a best-in-class operator
that is extremely well-positioned to meet the
rapidly growing demand for natural gas and
experience signicant fee-based growth,” the
board stated.
This positive message is in opposition to
comments from Eric Mandelblatt, who said:
“It has unfortunately become evident that
the CEO of the company, Alan Armstrong,
is incapable of maximizing shareholder
value and, instead, is primarily focused on
maintaining his role as CEO.” He also said
that Armstrong has “an abysmal operational
and nancial track record” and “lacks the
necessary judgment and character to lead the
company forward.”
The failed merger was a disappointment for
many of the board members for Williams,
but certain organizations within Oklahoma
viewed it as a sort of blessing. Tulsa Mayor
Dewey Bartlett said: “today’s events give
Williams, its shareholders, the city of Tulsa
and the state of Oklahoma the greatest
chance for success, both now and in the
years to come.” In addition, the Tulsa
Regional Chamber believed that the State of
Oklahoma would likely lose many jobs if the
merger succeeded.
Both the mayor and the chairman of the
Tulsa Regional Chamber, Jeff Dunn, said
that they have supported, and will continue
to support, Williams. The mayor said that
“Williams had Tulsa’s back all those years
ago, and the city has Williams’ back today,”
while Dunn said that “the chamber and the
city stand rmly in support of Williams
CEO Alan Armstrong and his management
team, and we pledge our ongoing support in
the days and weeks ahead.”
Oklahoma Regulators Expand Area of
Interest on Seismic Activity, Again
By Tim McNally
The increasing frequency and intensity of
earthquakes in Oklahoma have caused some
to look to the oil and gas industry to blame.
The Oklahoma Corporation Commission
(OCC) has been looking into this issue for
a number of years and has come to nd
that certain oil drilling practices have led to
induced seismicity. Numerous studies have
been conducted to get to the bottom of this
issue.
One particular released by Stanford in June
of 2015 identied a correlation between
the amount of wastewater that was
injected underground and the number of
earthquakes. Most of the issues were thought
to be coming from the Arbuckle formation,
a popular sedimentary underground
wastewater disposal site for producers.
Regulators, therefore, began by focusing
on individual wells that were disposing of
wastewater in the Arbuckle formation.
In March 2016, the OCC implemented new
guidelines for oil and gas companies in the
concerned regions. The commission also
decided to expand its so-called “Area of
Interest,” which seems to be expanding with
time. The guidelines implemented in March
included a 40% reduction in underground-
injected wastewater from the 2014 peak.
In mid-July, the OCC stated that it would
begin taking a look at all wells within the
Blanchard area, as there were 9 recent
earthquakes there. The OCC had earlier
declared an Area of Interest for a 15,000
square mile zone in the state, but the most
recent activity at Blanchard was outside of
this area. It was also noted that none of the
wells in the Blanchard area were within 20
miles of the Arbuckle formation, which
forced the commission to examine all wells
within the area.
These ever-broadening measures are going
to be continually implemented until the
number and intensity of earthquakes in
Oklahoma begin to decrease. In time, a
permanent solution might be identied to
create a safe environment for Oklahomans
without ceasing drilling operations.
Chesapeake Energy on the Rise Once
Again
By Tim McNally
Oklahoma City-based Chesapeake Energy
on Aug. 17 announced that it secured a
$1 billion loan for buying back a portion
of the company’s outstanding debt. The
move is part of Chesapeakes continuing
transformation to improve its nancial
standing as it attempts to streamline
operations and eliminate unnecessary costs.
It’s no secret that Chesapeake Energy, and
the oil industry as a whole, have been in a
rut these past two years. The continually
unfolding damage that has accompanied
the steep cut in the oil price, coupled
with rumors of a potential Chesapeake
bankruptcy, have made for a rough ride for
the stock price. February seemed to be the
lowest point for the stock, as it eventually
reached $1.50 a share. The stock has
since progressed upwards as Chesapeake
shut down the bankruptcy rumors and
successfully maintained access to a vital $4
billion credit line in April.
Chesapeake still has a considerable amount
of debt, but there has been a signicant
reduction in that debt as the company’s goals
have shifted in recent years.
“Our main focus is reduction of total
debt and the improvement in our liquidity,
specically debt maturing in the next six to
24 months,” Chesapeake CFO Domenic J.
Dell’Osso told analysts in a call. “Financial
discipline across our entire business remains
the priority at Chesapeake.”
The company has cut $3 billion in debt since
last year and its current outstanding debt
amounts to $8.7 billion, according to data
from Bloomberg.
That strategy has been successful so far, as
the stock seems to have been on the rise and
Moody’s changed its outlook on Chesapeake
to positive.
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
28
Numerous States, Oil & Gas Industry
Fighting EPA’s New Methane Rule
By Alex Mills
States and industry representatives
continue to challenge in court the
legality of the Environmental Protection
Agency’s (EPA) methane rules aimed at
the domestic oil and gas industry.
Texas Attorney General Ken Paxton
led suit in the US Court of Appeals
for the District of Columbia recently
challenging EPA’s “federal overreach”.
More than a dozen states have sued
over the rule because it is unnecessary
and would add additional cost to the
production of domestic energy.
States, like Texas, already regulate air
emissions through their own government
agencies, such as the Texas Commission
on Environmental Quality (TCEQ).
Other states joining the lawsuit are
Alabama, Arizona, Kansas, Montana,
Ohio, Oklahoma, South Carolina,
Kentucky, and North Carolina.
The Texas Alliance of Energy Producers
and the Independent Petroleum
Association of America (IPAA),
along with 17 other state and national
associations, have led a petition for
rehearing with the EPA on August 2.
Subpart OOOOa, as nalized, will
have a disproportionate impact
on independents, and especially
independents that constitute small
businesses under the “Regulatory
Flexibility Act”, the petition stated.
The issues raised fall into two categories:
1. Issues that are entitled for
reconsideration (under law) where it
is impracticable to raise an objection
during the period of public comment;
and
2. The EPA failed to address the nal
rule, and it will have a devastating
impact on the domestic oil and gas
industry if the rule is not corrected.
Alex Mills is President of the Texas
Alliance of Energy Producers. The
opinions expressed are solely of the
author.
Texas Railroad Commission Unveils
Oileld Relief Initiative
Texas Railroad Commissioner Christi
Craddick on Aug. 9 announced details
of a new oileld relief initiative for the
state.
The rst rule amendments for the
initiative were released during the
Commissioners’ open conference. The
initiative improves efciencies for the
state’s energy regulatory body, as well as
oil and gas producers working to sustain
business operations during the current
downturn in the energy sector, according
to the Railroad Commission of Texas
(RRC).
The RRC said that the initiative will
reduce the regulatory administrative
burden on industry while ensuring the
RRC continues to protect the public and
environment.
“This initiative is part of my ongoing
efforts to adjust our processes and put
in place common sense practices that
achieve greater effectiveness in regulating
energy the way it is produced today,”
Craddick said in an Aug. 9 statement.
“During my time at the Commission,
these efforts have not only included a
reevaluation of our methods and rules,
but also an overhaul of our IT programs.
Craddick added that the initiative calls
for a more thorough review in a time
of industry slow-down to save time and
money for the state and those doing
business at the agency.
“These initial ideas brought forth in the
initiative will save extensive time for our
staff and tens of millions of dollars for
oil and gas operators,” Craddick said.
“This initiative serves as phase one of
a long-term effort to streamline our
operations that our executive director
and staff will continue to carry out.”
The initiative results from a
comprehensive review of the RRC’s
regulatory processes, and seeks “to avoid
weakening public and environmental
protections, correlative rights, or
measures designed to prevent the waste
of resources,” the RRC said.
Judy Stark, Panhandle Producers and
Royalty Owners Association (PPROA)
executive vice president, applauded the
initiative.
“With the current industry downturn,
at stake is the survival of the state’s
small producers and the oil industry’s
many marginal wells, which make up
85 percent of total U.S. oil wells and 18
percent of the nation’s total oil output,”
Stark said in a statement. “During this
critical time, Commissioner Craddick’s
initiative will provide relief to Texas’
independent producers, the backbone of
both our state and nation’s oil industry.
For that, PPROA’s members are truly
grateful.”
The initiative includes the following
items for implementation:
• Identify agency reports and lings that
can be reduced or eliminated, saving
operating costs without affecting
public or environmental safety.
• Amend Statewide Rule (SWR) 28
to modify gas well deliverability
reporting requirements.
• Reduce the need for G-10 (Gas
Well Status Report) lings except
for surface commingled production.
• Allow a calculated well shut-in
pressure to be provided when ling
Form G-10 for gas wells to reduce
regulatory administrative burden.
• Amend production requirements for
marginal and stripper wells to reduce
regulatory administrative burdens.
• Revise “Active Oil Well” denition
from 10 barrels of oil (BO) per
TEXAS NEWS AT A GLANCE...
29
Oilman Magazine / September-October 2016 / OilmanMagazine.com
29
TEXAS NEWS AT A GLANCE...
month for three consecutive months
to ve BO per month for three
consecutive months or any reported
production in each month for a
consecutive 12-month period
(SWR 15).
• Revise “Active Gas Well” denition
from 100 mcfg per month to 50
mcfg per month or any reported
production in each month for a
consecutive 12-month period
(SWR 15).
• Implement a revised internal inspection
priority system so RRC inspectors
prioritize drilling rig inspections
and hydraulic fracture treatments
in sensitive areas, such as cities or
wetlands, without affecting other
inspections.
• The agency’s new online completion
program calculates the depth of cement
behind casing (cement tops) using
washout factors that have been used by
the RRC for decades. A review of these
washout factors should be conducted
to determine whether different washout
factors should be used in certain areas
of the state to calculate cement tops.
This will expedite the process of
verifying compliance with these rules
for both operators and the agency
without compromising well integrity.
• The Groundwater Advisory Unit
(GAU) will identify counties or
portions of counties in which the
usable quality water protection depth
is constant. Those areas will be eligible
for area-wide recommendations for
meeting surface casing requirements,
streamlining regulatory requirements
for industry.
• Issue guidance for implementation of
the Texas Environmental, Health &
Safety Audit Privilege Act, permitting
operators of new property to identify
and remedy violations resulting
previous to their ownership. This
guidance ensures compliance without
punishing an operator not responsible
for the cause of the violation.
• Conduct an extensive review of all
RRC forms required for application
and reporting purposes and determine
whether data collected is currently
used or no longer necessary. Eliminate
forms no longer useful to the RRC’s
regulatory functions to reduce
regulatory administrative burden on
staff and industry.
• Simplify the complete duplication of a
drilling permit application with a sworn
statement of no changes to the original
application. The operator would then
pay the fee for reissuance of the
permit, speeding up the review process
and reducing regulatory administrative
burden for both the agency and
industry.
—JD
O&G Industry Group Intervenes in
EPA Lawsuit
Law rm Haynes and Boone on Aug. 4
said that its lawyers have led a motion
on behalf of the Texas Independent
Producers & Royalty Owners Association
(TIPRO) to intervene in a lawsuit
brought by a group of environmental
organizations seeking to force the U.S.
Environmental Protection Agency
(EPA) to adopt stricter oil and gas waste
regulations.
According to the rm, the motion argues
that the environmental groups are trying
to compel the EPA to exceed its authority
and that the current Texas programs to
manage oil and gas waste disposal are the
most robust in the country.
“The Texas program has been approved
by the EPA 17 times — an average of
once every two years,” Dallas Partner
Suzanne Murray said in a statement. “The
relief being sought here goes beyond the
authority that Congress granted the EPA
under Subtitle D, so the court cannot
order to it to act the way that the plaintiffs
are requesting.”
Haynes and Boone said that, by ling the
case
(Background Environmental Integrity
Project et al v. McCarthy)
in federal court,
the coalition is asking the EPA to establish
rules to ban companies from spreading
fracking wastewater on roads or elds and
require disposal landlls and ponds to be
constructed to prevent pollutants from
leaking into groundwater. In addition,
the groups argue that under the Resource
Conservation and Recovery Act (RCRA),
the EPA must review and revise federal
regulations for oil and gas waste disposal
every three years. They also want the
agency to develop regulations on fracking
wastewater disposal in underground
injection wells, a practice some have
attempted to link to earthquakes in some
states.
Allen Gilmer, TIPRO chair and CEO
of Drillinginfo, said in a statement that
current rules are more than adequate.
“The Texas Railroad Commission and
the Texas Commission on Environmental
Quality require our industry to comply
with a comprehensive set of regulations
that contain numerous safeguards related
to the management of oil and gas waste,”
he said. “This extensive regulatory
framework far exceeds the minimum
requirements mandated under the RCRA
hazardous waste program.”
TIPRO President Ed Longanecker added
that the plaintiffs are likely operating in
cooperation with the EPA.
“This lawsuit is an example of the sue-
and-settle tactics used by anti-oil and
natural gas organizations in a larger
effort to slow or stop the development
of hydrocarbons in our country,” he
said. “This is yet another attempt to
compel the EPA to exceed its regulatory
authority with the ultimate goal of
reaching a settlement to fuel additional
activist campaigns, all at the expense of
taxpayers.”
According to Haynes and Boone, Murray
and TIPRO believe that the EPA and the
plaintiffs will oppose the motion, but that
the court will ultimately grant intervention
because there are issues of law presented
in the case that directly impact oil and gas
producers in Texas.
—JD
Oilman Magazine / September-October 2016 / OilmanMagazine.com
3030
LOUISIANA NEWS AT A GLANCE...
Industry Representatives Respond to
Favorable Jefferson Parish Lawsuit
By Tim McNally
The continuing battle between energy
companies and political forces in
Louisiana has been fought in multiple
regional courts. However, a ruling on
Aug. 1 has dictated that litigation against
oil companies is “premature.”
Government leaders in Louisiana,
whom had previously supported big
oil’s economic support to the state, have
recently turned on the industry, claiming
that oil companies are a main contributor
to the increasingly dire issue of coastal
erosion. Among those politicians are
Gov. John Bel Edwards and New Orleans
Mayor Mitch Landrieu.
Multiple Parishes, which are essentially
counties within Louisiana, have since
declared suit against the oil industry,
claiming certain companies have failed to
abide by the Coastal Zone Management
Act and that drilling operations have
damaged regional coastlines. However,
many would dispute the fact that oil
companies are the only contributor to
coast erosion.
The Associated Press reports that Robert
Meadows, a lawyer for Chevron, has
stated “It’s just such a vague attempt by
the plaintiffs to throw a blanket over
an entire industry and hold it singularly
responsible for a problem that’s got
multiple causes.” The oil industry has
pointed to other sources of coastal
erosions, such as hurricanes and the
Army Corp of Engineers, which have
built levees that supposedly interfere with
natural silt buildup. The industry also
points to the cutting down of coastal
trees, which were a natural deterrent of
erosion. Nonetheless, certain Parishes
maintain their focus on the oil industry.
Jefferson Parish recently faced an
unfavorable ruling on this front,
with Judicial District Court Judge
Stephen Enright saying that “existing
administrative remedies must be pursued
before a lawsuit for civil
damages is pursued.
The Parish and [State]
Intervenors failed to pursue
their administrative remedies
and failed to show that
the administrative remedy
is irreparably inadequate.
Accordingly, this lawsuit
is premature for failure
to exhaust administrative
remedies and is dismissed
without judgment.”
The Louisiana Oil and Gas
Association (LOGA) has held the
position that lawsuits against the oil
industry are not a true solution to the
problem of coastal erosion, and the
group heartily agrees with this most
recent ruling by Judge Enright.
LOGA said: “The district court’s ruling
makes it crystal clear that this litigation
scheme is premature and inappropriate.
As we have said from the beginning
and the court ruling further reiterates,
there is already a rigorous administrative
process in place to ensure that each and
every coastal use permit in the state is
in compliance with the Coastal Zone
Management Act.”
LOGA president Don Briggs had
previously stated that the lawsuits against
the oil industry seemed to be benecial
only to certain lawyers who were seeking
to line their pockets. The group again
reiterated this idea, stating: “The only
parties that benet from these premature
and unnecessary lawsuits are the small
group of trial lawyers who initiated them
to advance their own interests under the
guise of the public interest.”
The other Parishes, which have led suit,
have yet to receive a meaningful verdict
in the courts.
Port Cameron Seeks New Customers
Houston-based HBW Resources in July
said it was retained by Port Cameron,
LLC, to enhance the company’s campaign
to identify and secure new customers for
its new private deepwater, staging port in
Cameron Parish, La.
The port complex, located on the
Calcasieu Ship Channel, 185 miles east
of Houston and just south of Lake
Charles, will encompass 500 acres,
with an additional 750 acres available
for expansion in the future. The port’s
proximity to current and future shelf
and deepwater offshore oil and gas
exploration will help serve the growing
needs of energy development in the Gulf
of Mexico and help reduce operational
costs and risk.
The port, which, upon completion, will
be home to the largest private energy
services facility on the Gulf Coast, will
also have more than 21,000 linear feet of
bulkhead lots on dredged slips of 500-
and 700-foot widths, and dredged depths
of 33 feet.
Construction on the $1.5 billion project
is set to begin in November and is
expected to take up to four years, HBW
said.
“We are very pleased about the
opportunity to work with Port Cameron
and help build a new Gulf of Mexico
port lled with creative, logistic
solutions,” Jack Belcher, executive
vice president, HBW, said in a July 25
statement. “This deepwater port is
optimally suited for all aspects of the
energy sector in the Gulf of Mexico.
Port customers will maintain a private
slip, giving them a high degree of
versatility and optionality.”
–JD
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Oilman Magazine / September-October 2016 / OilmanMagazine.com
3131
LOUISIANA NEWS AT A GLANCE...
Senator Cassidy Applauds Cameron
LNG Export Authorization
U.S. Senator Bill Cassidy (R-La.) in
July applauded the U.S. Department
of Energy’s (DOE) nal approval of
Cameron LNG’s latest exportation
authorization to non-free trade agreement
(FTA) countries.
“This is great news for Southwest
Louisiana and the American energy
economy,” Cassidy said in a July 15
statement. “This approval will bring
billions of dollars of investment and good
high-paying jobs to Louisiana. There is a
tremendous global demand for American
natural gas, and today [DOE] made the
right decision in making our resources
available to international customers. The
department should approve other LNG
projects in an expeditious manner.”
In May 2015, Cameron LNG led an
application with DOE for authorization
to export LNG produced from domestic
sources in a volume equivalent to 515
billion cubic feet per year (Bcf/yr) from
the existing Cameron LNG Terminal
in Cameron and Calcasieu Parishes in
Louisiana.
Previously, Cameron LNG received
authorization from the Federal
Energy Regulatory Commission and
DOE to construct and develop three
liquefaction trains to liquefy natural
gas at the Cameron Terminal and to
export to foreign markets. The May 2015
application sought authorization to export
an additional volume of LNG from two
new liquefaction trains to be constructed
as an expansion project.
This latest authorization brings Cameron
LNG’s total authorized non-FTA export
volume to 1,287 Bcf/yr from ve trains
of the terminal.
According to DOE’s nal order, natural
gas exported under the order will be
delivered to the Cameron Terminal
through the Cameron Interstate Pipeline
from ve major interstate pipelines. The
source of the natural gas will include
supplies available from the Texas and
Louisiana producing regions. The
Barnett, Haynesville and Eagle Ford Shale
formations will serve as additional sources
of natural gas.
In its order, DOE said that it considered
the cumulative effects of the total volume
of all nal non-FTA export authorizations
to date. Including the latest Cameron
LNG authorization, DOE has authorized
a cumulative volume of exports totaling
13.22 Bcf/d of natural gas, or 4.83 Tcf/yr,
for 18 nal authorizations.
DOE said that it will continue taking
a “measured approach” in its review
of non-FTA export authorizations
for domestic LNG. The reasons DOE
cited for proceeding cautiously on new
authorizations included:
• The limited nature of LNG export
studies from 2014 and 2015
• Applications to export signicant
quantities of domestically produced
LNG are a “new phenomena with
uncertain impacts”
• The market for natural gas has
experienced rapid reversals in the past
and is again changing rapidly due to
economic, technological and regulatory
developments
“The market of the future very likely
will not resemble the market of today,”
DOE said in its order. “In recognition
of these factors, DOE intends to
monitor developments that could tend to
undermine the public interest in grants of
successive applications for exports.”
DOE’s authorization requires Cameron
LNG to begin LNG export operations
from the expansion project no later than
seven years from the July 15 date of the
order.
Cameron LNG is an indirect subsidiary of
Sempra Energy; GDF SUEZ S.A.; Mitsui
& Co., Ltd.; Mitsubishi Corp.; and Nippon
Yusen Kabushiki Kaisha.
–JD
Energy Scene with Jason Spiess
In American Policies, Energy Trumps This Election Year
OILMAN COLUMN
Oilman Magazine / September-October 2016 / OilmanMagazine.com
3232
Donald Trump took the stage at the annual
Williston Basin Petroleum Conference in
Bismarck, North Dakota, and said, “let’s
talk about energy.”
Speaking in front over 8,000 attendees at
the Bismarck Civic Center, Trump said: “I
am delighted to be in North Dakota, a state
where really you are at the forefront of a
new energy revolution.”
Trump referred to the signicant increases
in oil and natural gas production over
the last decade and that oil imports have
literally been cut in half.
“That is something that no one thought
would be happening really, for a very long
time,” Trump said.
Getting right into policy, Trump pointed
out that the upswing in production numbers
have come in spite of “massive bureaucratic
and political boundaries.”
“President Obama has done everything he
can to get in the way of American energy
for whatever reason,” Trump said. “He’s
made life much more difcult for North
Dakota. Has caused regulation, and I mean
serious regulation, which makes it harder
and harder to turn a prot.”
Transitioning Obama’s energy policies to
his political and presidential foe, Trump
addressed his views on Hillary Clinton’s
energetic past.
“If crooked Hillary Clinton is in charge,
things will get much worse, believe me —
all you have to do is follow her career,”
Trump said. “She will shut down energy
production from across this country.”
Trump continued saying that millions
of dollars of wealth will be destroyed
as a result. He used this platform as a
motivational tool in explaining why this
November’s election is going to be so so
crucial.
“And here is what it comes down to —
wealth, serious wealth from people, from
workers, from everybody, versus poverty,”
Trump said. “North Dakota shows
how energy exploration creates shared
prosperity. Better schools, more funding
The Trump plane leaving the Williston Basin Petroleum Conference.
U.S. Congressman Kevin Cramer (ND-R) stands next to
Donald Trump and briefed him on the oil and gas industry.
Over 8,000 people attended Trump’s speech at Bismarck Civic Center
during the Williston Basin Petroleum Conference.
OILMAN COLUMN
Oilman Magazine / September-October 2016 / OilmanMagazine.com
3333
for infrastructure, which we really need
throughout our country, high wages, lower
unemployment, things we have been missing
for a long time. It is a choice between
sharing this great energy wealth. We are
sharing in the poverty promise from Hillary
Clinton.”
Convincing people of Clinton’s past
wasn’t difcult for Trump, as he used her
own words from campaign speeches as
persuasion to the thousands booing the
moment Clinton’s name was mentioned.
“You don’t have to take my word for it, just
listen to Hillary in her own words. She’s
declared war on the American worker. Here
is what Hillary Clinton said earlier this year,
‘we are going to put a lot of coal miners
and coal companies out of work.’” Trump
said. “If she can shut down the mines, she
can really shut down our whole country, and
business will be permanently, in many cases,
permanently ruined.”
Trump jostled his rhetoric back to the
current president and how his energy policy
is hurting the middle class.
“Let me tell you how President Obama
undermined our crisis and our middle class.
The president stated that it was his intent
to eliminate oil and natural gas production
in America, if you can believe this,” Trump
said. “His policy is death by a thousand
cuts, through an onslaught of regulations.
For instance, the Environmental Protection
Agency’s use of totalitarian taxes forces
energy operators in North Dakota to pay
unprecedented multibillion dollar nes
before a penalty is even conrmed.”
His examples didn’t stop there. He
continued his list, citing that the Department
of Justice led a lawsuit against seven North
Dakota oil companies for the death of 28
birds, while the administration fast tracked
wind projects that kill more than a million
birds a year.
Using the examples in the Bakken of
how the Obama administration is halting
domestic energy, he layered in international
examples.
“Adding to the pain, president Obama
proposes a $10-per-barrel [fee] for American
produced oil in the middle of a downturn.
At the same time President Obama lifts
economic sanctions on Iran and imposes
economic sanctions on America,” Trump
said. “He’s allowed this country to hit the
lowest rig count since 1999. Producing
thousands of layoffs, thousands. America’s
incredible energy potential remains
untapped. It’s totally self-inicted, it’s a
wound that we have to heal.”
Transitioning, and even juxtaposing to his
energy policy, Trump declared under his
administration, the U.S. will accomplish a
complete energy independence, producing
an abundance of jobs.
“Imagine a world where our foes and
energy cartels can no longer use energy as a
weapon,” Trump said.
Trump attempted to separate himself from
the current establishment even further by
suggesting Clinton and Obama come from
a different school of thought — one where
the U.S. is dependent on others.
“It’s from a whole different school. Let
me list some of the good energy projects
he has killed. He rejected the Keystone
XL pipeline, despite the fact it would have
created 42,000 jobs,” Trump said. “His own
state department concluded that it would
be the safest pipeline ever
built in the Unites States, and it would have
no signicant impact on the environment.”
Trump continued by saying that while
Obama was rejecting the Keystone XL
pipelines, he made a deal that allows Iran to
transport more oil and wasn’t subject to any
environmental reviews.
The presidential candidate took his energy
platform outside the Bakken’s private
mineral rights and into state-owned minerals
and federal lands.
“He’s taking huge percentages of the
Alaskan petroleum, and he’s taken the
reserve completely off the table, he’s taken it
completely off the table,” Trump said. “Oil
and and natural gas production on federal
lands is down 10 percent, which is pretty
hard to believe. Eighty-seven percent of
available land in the outer continental shelf
has been out off limits. Totally.”
He cited the movement against the Atlantic
Lease Sales and how that would close down
despite the fact that they would create
280,000 jobs and 23.5 billion dollars in
economic activity. He also disagreed with
President Obama entering the U.S. into the
Paris Climate Accordance unilaterally and
without the permission of Congress.
“This agreement gives foreign bureaucrats
control over our energy and how much we
use right here in America,” Trump said.
“So foreign bureaucrats are going to be
controlling what we are using and what we
are doing on our land in our country. No
way.”
Read the full article at OilmanMagazine.com
Photography Credit: Renae Mitchell
Lynn Helms, Director, North Dakota Department of
Mineral Resources gives an overview of the Bakken
energy potentials.
Donald Trump speaks as the Keynote speaker
at the Williston Basin Petroleum Conference
in Bismarck, ND.
James Volker, CEO, Whiting Petroleum, explains why
their company is heavily invested in the Bakken shale
play at the Williston Basin Petroleum Conference.
Former football coach and current analyst,
Lou Holtz, presents to the Williston Basin
Petroleum Conference attendees.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
34
While other industries have adopted
software technology to automate and
optimize business processes, the oil and
gas industry has been slower to respond.
The companies that aren’t behind are
using software to eliminate waste, identify
areas of efciencies and undertake best
practices to better control costs and
manage capital expenditures.
In today’s oil and gas economic climate,
commodity prices are at record lows,
leading to tight budgets with companies
reducing their capital expenditures.
Managing capital expenditures and
budgeting AFEs is only half the battle
to controlling costs. It’s no longer a case
where companies are setting capital
budgets and have AFEs that they’re
budgeting for that particular year, they
now need to be able to forecast their
costs and future spend on projects. We no
longer have margins for budget overages.
Forecasting AFE spending is the key to
surviving the downturn and managing
cash ow, but many companies don’t
have the best practices and appropriate
technologies in place to manage capital
expenditures and forecast costs in this
new environment.
Challenges
Some of the challenges companies face
when trying to establish cost control and
capital management best practices are:
• Capturing eld costs and insuring data
entry is accurate, detailed and updated
weekly. A lot of companies still aren’t
tracking their eld cost data on a daily
basis; or down to the line item. So
they’re not able to capture a forecast
and track their year-to-date spending
against their budget.
• AFE spend must be monitored
monthly. It’s no longer a matter of
checking end of the year, inception-to-
date costs.
• Companies don’t have the tools or
processes in place to allow AFE budget
managers to monitor current spending
and to forecast future spending
from initial budget through project
completion.
• No process for project completion and
closing AFEs, which means they are
not able to put costs against the AFE,
which leads to a project being over
budget.
• Not all CapEx projects are captured in
the forecast. They might be capturing
drilling and completion, for instance,
but not their G&A AFEs or workovers.
It’s really important to capture all
capital expenditures in the tool they
use so they can forecast all their
expenditures and future spending.
• No tools or processes in place
to reforecast based on level of
completion, scheduled updates or cost
adjustments.
• No process to ensure proper accruals
are being made each month, enabling
more accurate forecasting of remaining
months.
The Solution
The rst step to solving these challenges
is to clearly dene ownership of AFE
forecasting, budgeting costs and managing
capital projects. This step probably
includes three different people in a
OILMAN COLUMN
Best Practices for Cost Control
and Capital Management
By Marsha Vigil
Oilman Magazine / September-October 2016 / OilmanMagazine.com
35
OILMAN COLUMN
company, or different business units, so it’s
important to dene who owns these areas
and make sure they’re using one application
that lets them do their part while allowing
all individuals to contribute.
To do this, you need to adopt one
solution for a centralized approach
to AFE capital tracking, monitoring
and forecasting. Have one
solution that lets you budget
your AFEs, budget your capital
expenditures at the well, asset,
and corporation level, and forecast
future spending.
This solution should integrate with
other key systems for real-time spend
analysis. It’s not enough to just have an
AFE automated workow tool; if you’re
not integrating with accounting systems or
well data management systems, you don’t
have access to your real-time spending.
Best Practices
Inception-to-Date Costs
Below you can see an example of
inception-to-date costs of a well. Here, you
can look at what was budgeted on the AFE
and what actual costs you have incurred on
a monthly basis vs. eld costs.
The ability to look at your overall gross
estimate versus actual versus eld costs
is imperative to be able to manage your
capital expenditures at the well level and roll
up that information to the corporate
level. It’s very important to be able
to provide this information to your
investors, to your joint venture
partners, or potentially with your
working interest partners.
Monthly AFE Costs
It used to be that your budget managers
were looking at the overall inception-to-
date costs on the AFE. Now they really
need to monitor the spending on a monthly
basis. You can’t be $80,000 over on a well
for a particular month, as the margins are
too slim. So it’s important to have the tools
to monitor AFE spend on a monthly basis
in order to identify any overspending by
drilling down to a specic line-item, invoice
or vendor.
Update AFE Monthly Project Forecasts
As you go through an AFE project, you
need to be able to adjust your monthly
project forecasts. So whatever the remaining
amount is to complete the project, you need
to update that and forecast it within the tool
you use.
Summary
To summarize:
• Managing capital expenditures and
budgeting AFEs is not enough to control
costs.
• Forecasting AFE spend monthly is
imperative.
• Companies need a process to accurately
forecast AFE spending in future months
in order to manage cash ow.
• Accurate eld data entry and project
forecasting is key to preventing budget
overruns.
• Improve bottom lines and gain
signicant competitive advantage,
by undertaking best practices and
appropriate technologies to manage
capital expenditures and forecast costs
more accurately.
So if you want to improve your cost control
and capital management, ask yourself, do
you have the technology in place today
to forecast AFE spending, control costs,
and manage your capital efciently? If the
answer is no, now might be the ideal time
to implement a system that will get you to
where you need to be. With margins this
tight, you can’t afford not to.
Marsha Vigil is an Account Manager
with Energy Navigator and a subject
matter expert in AFE workow best
practices, business processes and process
improvement. Marsha’s primary focus in
helping clients identify and preserve value
with less work.
Oilman Magazine / September-October 2016 / OilmanMagazine.com
36
OILMAN COLUMN
The 24th Annual/Anniversary of Energy
Policy Conference (IEPC) — Roundtable/
Summit was held Aug. 11, 2016, at the
Renaissance Hotel in Tulsa, Okla. The
roundtable was hosted by IEPC, The
Energy Advocates and the Master of
Energy Program, University of Tulsa. I
served as the moderator of the roundtable.
There were around 60 roundtable
participants. Representatives included
state and federal government, chamber of
commerce, public relations rm, concerned
citizens, various areas of the energy sector,
professors, think-tanks, energy management
students from across the U.S., and the media.
Several questions/subjects were briey
discussed regarding messages and the
media covering/including: energy and water
resources, hydraulic fracturing/horizontal
drilling, endangered species act, regulations,
energy & the environment, public
perception of energy, energy education,
the abundance of U.S. energy resources,
economic development, and national
security.
The roundtable opened up with an overview
of an article in
National Affairs
written by
Dr. Eric Claeys, professor at George Mason
University, entitled “The Case for Shale.”
Dr. Claeys stated: “And so far, critics of
shale production seem to be gaining the
moral high ground. They indict shale
production in moral terms. Unconventional
energy producers are accused of ‘polluting’
sources of fresh water and the air, and of
‘exploiting’ the landowners from whom
they lease. By contrast, defenses of shale
production are fairly apolitical, often resting
on economic statistics about wealth and
jobs. To date, however, the shale revolution’s
supporters haven’t developed or effectively
publicized an account of why the shale
revolution is also just, a success story on a
moral level as well as an economic one.” —
I highly suggest every concerned citizen read
Dr. Claeys article.
Dr. Claeys ends his article: “In a community
in which anti-fracking rhetoric dominates,
life and politics are characterized by scarcity
and fears. That climate denies everyone—
workers, consumers, landowners—
opportunities to help themselves. By
contrast, in a system of free enterprise,
owners use their land to make their own
lives better, and everyone benets when
energy companies increase the supply of
energy available for all. The shale revolution
needs more champions who can remind
American citizens why. And so does
the American system of free enterprise
generally.”
Takeaways from the roundtable: the energy
industry should be more involved in telling
its stories/messages; social media should
have a stronger presence; the energy
industry should present the energy facts; the
energy industry should be pro-active when it
has made mistakes, be more transparent; the
energy industry should educate the public
about the importance of a strong energy
industry and environmental preservation;
and the energy industry should advocate
the development of all forms of energy for
America’s security.
In December 2011, I was quoted by
Paul Wiseman of the
Midland Telegram
,
Midland, Texas, about the importance of
public energy education and the need for
each energy company to become involved.
Loren Steffy, a business columnist at the
Houston Chronicle
at that time, commented
on this article on his blog, saying, “One of
the questions I am asked most frequently
when I speak to the industry groups pertains
to the industry’s image and what can be
done about it. I usually nd myself talking
about how the industry has done a poor
job…and how because much of the energy
industry has little contact with the public,
the only time it nds itself in the spotlight is
when something goes terribly wrong.”
The responses from the roundtables
throughout the years have been very
positive. For example, a college student
attending one of the roundtables in
Washington, D.C., wrote to me: “I enjoyed
the roundtable so much that it prompted
me to enroll in a natural resources and
environmental economics course. I am
beginning to work on a research paper on
how our nation’s energy policy should be
structured and improved. The roundtable
was one of the highlights of my time in
Washington, D.C.”
Why should we care? Future generations
are depending on us to keep the American
dream alive!
The roundtable was followed by a
reception/dinner honoring Richard B.
“Dick” Williamson, Chairman of the Board
of T.D. Williamson, Inc., Tulsa, Okla.,
Lifetime Achievement Energy Advocate of
the Year; and Kurt Abraham, Editor/Chief
Forecaster,
World Oil
, the Energy Advocates
Journalist of the Year. Kurt Abraham was
the keynote speaker. Dr. Tim Coburn,
Director of Master of Energy Business
Program, University of Tulsa, served as
Host Chairman/Master of Ceremonies.
Next year, the 25th Anniversary of
the IEPC will be held in Oklahoma.
Information will be announced and updated
on www.energypolicyconference.com.
America Needs America’s Energy! It’s Time
to Tell Our Story!
Energy Messages & the Media
By Mark Stansberry
EVERY WORKER. EVERY INDUSTRY. EVERY TIME. Because that’s how workers’ comp is supposed to work –
with an unwavering dedication to the businesses we support and the workers we serve.
Visit us online at lwcc.com or call 225-924-7788 to learn more.
Louisiana Oilman 8.75" x 11".indd 3 8/4/16 3:16 PM
