April 2014 - The Bakken magazine

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CONTENTS

APRIL 2014

VOLUME 2 ISSUE 4

Pg 22 LOGISTICS

Entering The Frack Sand Business

The story of Victory Silica reveals the complexities of the frack sand business in an industry with a clear demand for product.

BY THE BAKKEN MAGAZINE STAFF

Pg 40 PRODUCTS & TECHNOLOGY

Recording Extreme Bakken Mill Times Jesse Crone, a dog named Remi and a new mill design are bringing wells on production quicker than ever before.

BY LUKE GEIVER DEPARTMENTS

MAKING IT

44 ND Trade Mission Connects Bakken to Canadian Investors

The North Dakota Trade Office, led by Lt. Gov. Drew Wrigley, is headed to Toronto, Montreal and Ottawa to unite Bakken-businesses with potential partners or investors.

BY THE BAKKEN MAGAZINE STAFF

Pg 32 EXPLORATION & PRODUCTION

Trending Now: Cemented Liners in the Bakken

Many operators have reported increased production with cemented liners. Some technology providers have already begun making the proven process better.

BY LUKE GEIVER

IN PLAY

46 Bakken-Specific Merger

Allied Wireline LLC entered the Bakken in 2013, and through its merger with Horizontal Wireline Services, is it ready to truly expand.

BY THE BAKKEN MAGAZINE STAFF

6 Editor’s Note

A New Term To Know

BY LUKE GEIVER

8 ND Petroleum Council ON THE COVER: The image represents a lateral with a cemented liner and a ball-drop fracture sleeve system. The cemented liners, combined with the sleeve system, allow for more fracture initiation points along the lateral.

Williston Basin Petroleum Conference to be Biggest, Best Yet

BY TESSA SANDSTROM

10 Bakken News

Bakken News and Trends

PHOTO: TRICAN COMPLETION SERVICES

THEBAKKEN.COM

5

EDITOR'S NOTE

A New Term To Know Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

Cemented liners could be joining zipper fracks, infill drilling programs and plug-and-perfs in the terminology used to explain the current state of drilling in the Bakken. Thanks to the undeniable production gains recorded by several Williston Basin operators who’ve used the cemented liner method for well completion, cemented liners are gaining acceptance.

Briefly, use of a cemented liner allows the operators to break more rock. As shown in this month’s feature on cemented liners breaking more rock can yield a 20 to 100 percent increase in well production compared to other methods. Attesting to the constant quest for oilfield efficiency, a completions team we spoke with has embraced the cemented liner approach. The team has invested great effort into educating its many clients on the benefits of cemented liners and has also designed specific technology for cemented liner completion approaches. The story explains why the industry has begun to adopt cemented liners and shows how quickly technology can be tweaked for the needs of the industry.

Jesse Crone, who knows something about tweaking technology, has helped lead an energy services team in utilizing a unique mill to remove frack sleeves and composite plugs. The Remi mill, named after a Louisiana toolmaker’s dog, has recorded some impressive numbers. It was designed to present a new cutting face as the mill is pushed further along the lateral. If the story of Crone’s path to the Bakken doesn’t pique your interest, then the performance of the Remi mill should.

In keeping with our April theme of hydraulic fracturing, we also detail one company’s path into the frack sand production and supply business. Victory Silica, a sister company of Victory Nickel, has taken a unique approach to supplying the Bakken with much-needed frack sand. Victory’s story shows that the frack sand business involves much more than mining sand and selling it. The company is in the midst of a three-phase plan to establish clients, increase sand production and create a logistical sand distribution advantage over other, well-established sand providers. Sand from Wisconsin and northern Manitoba will be used by Victory. The plan modifies how sand is handled, stored and ultimately transported to the well site.

For any Bakken-based businesses looking for an infusion of capital, potential partners or other opportunities, the North Dakota Trade Office has developed a trade mission to three major Canadian cities. Donovan Johnson, a member of the NDTO helping to lead the trade mission, is excited for the trip. His excitement, he told me, is based on the incredible story of the Bakken and his hopes of sharing that story with as many as possible. As you might imagine, we had to write about that.

For the Latest Industry News:

www.TheBakken.com Follow us: twitter.com/thebakkenmag facebook.com/TheBakkenMag 6

The BAKKEN MAGAZINE APRIL 2014

ADVERTISER INDEX www.THEBAKKEN.com VOLUME 2 ISSUE 4

15

AE2S

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AE2S Water Solutions

4

EDITORIAL

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Editor Luke Geiver lgeiver@bbiinternational.com Senior Editor Sue Retka-Schill sretkaschill@bbiinternational.com

Avitus Group Bakken Directory

42

BakkenJobs.com

29

Bartlett & West

31

Bert's Truck Equipment

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Blackmer

PUBLISHING & SALES

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Brock White Company

Chairman Mike Bryan mbryan@bbiinternational.com

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Capital Lodge

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Capps Van & Truck Rental

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CHS, Inc.

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

CEO Joe Bryan jbryan@bbiinternational.com President Tom Bryan tbryan@bbiinternational.com Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Vice President of Content Tim Portz tportz@bbiinternational.com Business Development Manager Bob Brown bbrown@bbiinternational.com

27

Dakota Fence

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DenBeste Water Solutions

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ECKEL Manufacturing Co., Inc.

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FMC Technologies Inc.

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Gamajet Cleaning Systems, Inc.

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Greystone Construction

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Account Manager Tami Pearson tpearson@bbiinternational.com

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Marketing Director John Nelson jnelson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

ART Art Director Jaci Satterlund jsatterlund@bbiinternational.com

10-11

National Oilwell Varco

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Pedigree Technologies

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Petrogas Process Systems Inc.

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Presto Geosystems

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Quality Mat Company

28

The Bakken/Three Forks Shale Oil Innovation Conference & Expo 2015

39 2

Subscriptions Subscriptions to The Bakken magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www. thebakken.com or you can send your mailing address and payment (checks made out to BBI International) to: The Bakken magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@bbiinternational.com.

Advertising The Bakken magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about The Bakken magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to The Bakken magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to lgeiver@bbiinternational.com.

International Road Dynamic Inc. MBI Energy Services

RecyClean Services Rossco Crane

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SDLG

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Wells Concrete

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Wingate By Wyndham

COPYRIGHT © 2014

by BBI International TM

Please recycle this magazine and remove inserts or samples before recycling

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7

NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

EVEN BETTER: Ron Ness, president of the North Dakota Petroleum Council, addresses a record-breaking crowd at the 2012 Williston Basin Petroleum Conference held in Bismarck, N.D. PHOTO: NDPC

Williston Basin Petroleum Conference to be biggest, best yet

By Tessa Sandstrom

“The best is yet to come.”

our region. With the WBPC now just weeks away, however, that This was the promise from slogan could also apply to this year’s conference, with more than the 2012 Williston Basin Petroleum Conference when it was last 400 exhibitors and a great line-up held in Bismarck. The slogan, of of speakers.

The 2012 conference sold course, alluded to the potential out in a record time of 17 minof the Bakken and Three Forks utes, but that record was eclipsed formations in North Dakota, Montana and Saskatchewan and this January when booth space sold out within four minutes the tremendous economic and and more than 800 people were career opportunities it brings to

8

The BAKKEN MAGAZINE APRIL 2014

still online trying to secure their space. Hotel rooms for BismarckMandan are already booked, and this year is promising to be the largest WBPC yet.

It’s no wonder; the Bakken continues to draw national and international attention, with reporters, ambassadors and leaders visiting from Japan, Norway, Australia, India, Germany and others, as the Bakken has helped make

North Dakota a Cinderella story of sorts. Where our state once only topped the lists of states with the largest outmigration of young people or states with the oldest population, North Dakota has now found itself atop lists ranking the best states for young people, the best states for job creation, and the happiest states.

Despite being more than eight years into what is often

called the Bakken Boom (a boom it is not, but rather a continually growing play and industry), this limelight and attention is still a fairly new phenomenon for North Dakota, which was once cast aside as nothing more than a flyover state or a buffalo commons. Now, we continue to attract renowned journalists and commentators, including television and radio personality, Sean Hannity. After interviewing Billings County Commissioner and industry leader Jim Arthaud of MBI Energy Services on his radio program, Hannity agreed to see the Bakken for himself and will be the keynote speaker at this year’s WBPC. Arthaud personally invited Hannity to the conference to be a keynote speaker and will also host Hannity on a tour of the Bakken.

Hannity has often highlighted North Dakota on his show and in his blog as an example for the nation in creating jobs, growing our economy, and moving us toward energy independence.

“Unleash our resources. Unleash the ingenuity of American innovators. Unleash the work ethic of Americans desperate to work hard and earn a good living. We have the ability to be a thriving nation,” he wrote. And, as we

will see and learn from many of the speakers at this year’s WBPC, that’s exactly what we’ve done in North Dakota and will continue to do.

As a well-known speaker, journalist, author and political commentator, Hannity has no doubt traveled the nation. We are excited to hear Hannity’s perspective about how our little state of North Dakota and our neighbors, Montana and Saskatchewan, are making a difference throughout the nation and even the world. We also look forward to introducing him to the many men and women who have helped develop the Bakken through technology and innovation that has helped make the Williston Basin a leader in the national energy renaissance, bringing us closer to energy security and reviving the American dream.

Hannity, of course, is not our only renowned speaker.

Joining him will be some of the energy leaders themselves, including Continental CEO Harold Hamm, Oasis Petroleum CEO Tommy Nusz, Marathon CEO Lee Tillman, and Whiting Petroleum CEO Jim Volker who will discuss the industry’s future in North Dakota. More than 70 other speakers will address topics covering Bakken pipeline and rail infrastructure, impacts, flaring technologies, Bakken optimization, geology and more.

While all of these great talks will be open only to WBPC attendees, new to this year’s conference will be two Bakken Education Sessions. These sessions will be held at the Ramkota Ballroom and are free and open to the public. Ron Ness of the North Dakota Petroleum Coun-

cil, Kathy Neset, a geologist and owner of Neset Consulting Service, and Alison Ritter of the North Dakota Department of Mineral Resources will each give presentations on the basics of Bakken geology, drilling, and hydraulic fracturing and take questions from the audience.

Two separate sessions will be held Tuesday, May 20, with one beginning at 1:30 p.m. and another beginning at 3:30 p.m., and we encourage the public to come and learn more about this burgeoning industry.

Author: Tessa Sandstrom Communications Manager, North Dakota Petroleum Council tsandstrom@ndoil.org 701-557-7744

ON THE WEB

For more information about the Williston Basin Petroleum Conference, visit www.wbpcnd.org.

THEBAKKEN.COM

9

EPA APPROVED

The Issue Are you ready for the April 2014 deadline for the new EPA regulation and compliance requirements?

EPA’S AIR RULES FOR THE OIL & NATURAL GAS INDUSTRY Storage tanks used in oil or natural gas production are subject to EPA’s 2012 New Source Performance Standards (NSPS) for VOCs if they have the potential to emit six or more tons of VOCs a year. This legislation (40 CFR 60 Subpart 0000, “Quad 0”) also affects existing tank batteries built from August 2011 to present. Tanks that come online after the most recent proposal is published in the Federal Register will have to have controls (a combustor or vapor recovery unit), to reduce VOC emissions by 95 percent in place by April 15, 2014 or within 60 days after startup, whichever is later.

Get ready now and contact NOV Mission today:

© 2013 National Oilwell Varco All rights reserved D392005589-MKT-001 Rev 01

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The Solution MISSION™ Enclosed Vapor Combustors: MEVC NOV Mission introduces a full line of reliable enclosed combustors for the ever changing requirements of today’s regulation filled oil and gas industry. Mission’s MEVC design incorporates years of tank vapor experience with a highly effective combustor design— tested and EPA approved “99% plus” for destruction of vent emissions from oil and condensate tank batteries, loading operations and storage facilities. NOV Mission’s stainless steel enclosed flare design is capable of meeting strict environmental industry regulations while also offering significant cost savings. Scalable to customer application, this combustor is field-proven throughout the world.

For more information visit: www.nov.com/mission

One Company. . .Unlimited Solutions

THEBAKKEN.COM

11

BAKKEN NEWS 85%

CAPTURED

BAKKEN NEWS & TRENDS

90% CAPTURED

WITHIN 6 YEARS

WITHIN 2 YEARS

95% CAPTURED

60%

CAPTURED TODAY

FLARED GAS CAPTURE GOAL with full engagement from NDIC, state agencies, legislature, Three Affiliated Tribes, landowners, and oil and gas companies

12

The BAKKEN MAGAZINE APRIL 2014

EVENTUAL TOTAL

NDIC’S RECOMMENDATIONS Require Gas Capture Plans for all future increased density, temporary spacing and proper spacing cases.

BAKKEN NEWS

Require Gas Capture Plans for all applications for permit to drill after June 1.

And, add a requirement of affidavit that GCP has been provided to listed gathering companies in the area.

Meet semi-annually with gathering companies to gauge effect of GCP’s, production curtailments, contracts and service interruptions.

Dedicate IT resources to develop a web-based pipeline incident report form.

Direct Pipeline Authority to track flaring on and off the Fort Berthold Reservation and to track and report capture vs goals.

Docket for hearing a motion to review and revise all Bakken and Three Forks field rules governing production curtailment.

To Reach Flare Capture Goals

In response to flare reduction targets created by the North Dakota Petroleum Council, and new flaring rules approved by the North Dakota Industrial Commission’s Department of Mineral Resources, Chad Wocken, senior research manager at the Energy & Environmental Research Center, has created a list of possible solutions for operators or midstream companies looking for a flare-reduction technology. The list consists of vendor-supplied information on technologies suitable for a range of different operating conditions and purposes.

“Most people would assume that there is a silver bullet out there,” Wocken said, “that if we could just find it and deploy it a thousand times that we would be able to capture all of this gas. But it is just not that easy. This flaring problem is a really nuanced issue.”

The NDIC recently approved six |continued on next page|

COSTS TO OPERATE TYPICAL 1 MW DIESEL-POWERED GENERATOR SOURCE: AUX ENERGY LLC

Generator Rental: $800/day, $22,400/mo.

Diesel Fuel: Constumption: Fuel Costs:

60 gal/hr $4.00/gal

Operational Fuel Costs:

Operating per Hour: $240.00 Operating 8 Hours: $1,920.00 Operating 24 Hours: $5,760.00

Monthly Fuel Costs:

Single Shift Operations: $48,000 to $53,000 24/7 Operations: $144,000 to $159,000 THEBAKKEN.COM

13

BAKKEN NEWS

FORMING THE RIGHT OF WAY TASK FORCE

The NDPC’s flare reduction plan called for the formation of a Right of Way Task Force to improve ROW access to reduce flaring. According to the NDPC, the inability to obtain right of ways is a primary cause for natural gas flaring. A well is producing at its highest rate during the first 180 days of production, the same amount of time it typically takes for an easement acquisition to be granted. The ROW task force, including the North Dakota Pipeline Authority, the State Energy Impact Coordinator, county leaders, landowner groups, industry members and headed by the Attorney General, could help the land access process and connect wells faster.

|continued from previous page|

recommendations for flare reduction in the state. The recommendations will require operators that are submitting applications for permits to drill after June 1, to include Gas Capture Plans that outline how a new well will approach flare reduction, among many other requirements. The GCP’s will include a location of a well, closest pipeline and processing plant, the system capacity of gathering and

14

transport lines, the volume of gas flowing from multiwell pads and a time period for a connection.

Wocken and his team were asked by the North Dakota Petroleum Council to compile the list in an effort to help operators and midstream companies find a flaring solution. The team has worked with the technology providers to help them understand the nature and components

The BAKKEN MAGAZINE APRIL 2014

within flared gas from the Bakken, and to explain the extreme operating conditions any technology will face during winter months. Wocken has also worked with multiple vendors to highlight opportunities to combine technologies that complement each other.

For the past eight months, Wocken’s team has been working with operators as the NDPC developed its flare reduction goals. The

NDPC’s Flaring Task Force goals, if completed, would increase natural gas capture to 85 percent within two years, 90 percent in six years and potentially 95 percent after that.

“If flaring technology is packaged appropriately, it will provide a benefit, but it depends on the conditions,” he said.

Because every well in the Williston Basin could be operating in unique or varying

BAKKEN NEWS

Typical Process/Time to Connect Well/Multiwell Pad to Gas Plant:

90 days

Identify well, negotiate and execute gas processing agreement

30 days

30 -180 days

Following approved permit acquire right of way (ROW)

Following agreement, apply for county permit

30 days

Upon ROW acquisition, construct gathering lines and other facilities

Average Process/Time = 180-330 days

Note: A well can typically be connected in 90 days (weather permitting) if the contract is already in place.

conditions compared to every other well, there is a huge need for multiple technologies, Wocken said. In some cases, a remote well site that uses flared gas to power a diesel generator makes sense. But, not all remote sites are suitable for flared gas power generation technology. If a well utilizing flared gas power generation is shut-in for any reason, (maxed out oil tanks that have to be relieved), then the flared gas

that is used to power the site may not be produced at a high-enough rate to power the site. In the case of a grid-interconnect situation, the cost and time associated with connecting a flared gas-to-electricty system to a grid may not be worth it. And, although some natural gas liquid (NGL) recovery systems work to reduce flaring, many systems do not treat the methane stream in the gas, an element of the systems

that doesn’t entirely capture the flare. “Every one of these technologies have complicated nuisances,” he says.

The flaring solutions database contains the technology’s application or ability to treat, capture or create NGLs, power, compressed natural gas and others. The list also includes the economics of each system and other case study information or accompanying documents submitted by the

vendors. Wocken and his team are also considering demonstration projects and other vendor specific projects to study and verify the effectiveness of certain flaring technology approaches. The list currently includes more than 40 technologies.

THEBAKKEN.COM

15

BAKKEN NEWS

EOG’s High-Density Sand Volumes Pay Off Ongoing improvements in drilling and completion techniques have transformed what was a steady development drilling program for EOG Resources’ Bakken and Three Forks assets, “into a high-rateof-return crude oil growth play,” according to the exploration and production pioneer.

The company has gone to a completion design based on shorter fractures in combination with high-density sand volumes. The new design has yielded huge results.

EOG’s well production averages for its 30-day initial production rates in 2013 were 50 percent higher than the previous year because of the completion design. In 2012, IP rates for EOG’s Bakken wells averaged 894 barrels of oil per day, but in 2013, the average IP rate for Bakken wells reached 1,342 bopd. In the first 100 days of production, 2013 wells

EOG Resource Core and Antelope Well Performance SOURCE: EOG RESOURCES

Average 30-Day Oil IP Rate (Bopd)

Average Cumulative Oil Production (100 Days) (Bo)

63% Improvement

200,000 160,000

1,342

2013

894

120,000

2012

80,000 40,000 0

0

100

200

300

400

(Days)

recorded a 63 percent increase over the previous year.

EOG’s 90,000 net acres in the core of the Bakken are showing strong infill IP rates with shallower declines as well, according to the company. All new wells will be completed

with the high-density frack sand, short frack interval method. And, the sand will be sourced from an EOG-owned facility based in Texas. This year, EOG will use six drilling rigs, drilling roughly four wells per section. The company has

2012

2013

already received positive tests from testing in the first and second benches of the Three Forks formation. Testing on the third bench of the Three Forks will take place this year, and EOG plans to drill 80 net wells by year’s end.

Seeking Strategic Partners We are actively seeking companies to join our existing network of strategic partners to deploy DenBeste's growing and diverse fleet of Frac Tanks. Potential partners will have strong established relationships with the various industries that utilize specialty liquid holding tanks (frac tanks). This will include, but not limited to companies that are located in active shale plays, producers, oil field companies, environmental, remediation and construction. DenBeste's strategic partner program creates both business services and shared income opportunities for companies looking to enhance and diversify their existing services.

Please contact Tom Arranaga at (951) 905-2736, tarranaga@DenBesteWaterSolutions.com or Tracie Schroeder at (707) 838-1407, tschroeder@denbestewatersolutions.com.

www.denbestewatersolutions.com 16

The BAKKEN MAGAZINE APRIL 2014

BAKKEN NEWS

Pipeline Operators Continue Open Season Calls Depending on shipper commitments, Bakken crude could be shipped to the Gulf Coast by the Dakota Access LLC pipeline, a proposed pipeline under development by Energy Transfer Partners. ETP has several pipeline assets in the Gulf Coast and near Illinois. The energy company also owns Sunoco Inc., and a large portion of Sunoco Logistics LP, a company that operates crude oil and refined product pipelines and terminals. ETP has issued an open season to Bakken shippers.

Through the open season, shippers that commit would be given a discounted rate in comparison to other uncommitted shippers for the same volumes delivered to the same destination point.

Committed shippers would also receive the option of forming five-, seven- or 10-year commitments depending on the destination point. The Dakota Access pipeline capacity and overall scope will depend on shipper

commitments. The project could be operational by 2016, according to the company.

Enable Midstream Partners LP has already found success, and shipper commitments from Bakken operators. XTO Energy, a subsidiary of Exxon Mobil Corp., recently formed a long-term agreement with Enable to gather and move XTO’s Bakken crude. Enable will build a gathering and transport system in the North Dakota Counties of Williams and Mountrail. The 30,000 barrels per day system will require 85 miles of gathering lines. XTO has also agreed with Enable to build a water gathering and transport system to move produced water. The system will require 75 miles of pipeline.

In April 2013, XTO agreed with Enable to build a crude gathering system for XTO’s Bakken crude in Dunn and McKenzie counties. That system can move 19,500 bopd.

ENERGY TRANSFER ASSETS

Note: Excludes SUG LDCs SOURCE: ENERGY TRANSFER

The success of Enable should provide incentive for Hiland Crude LLC, the Oklahoma-based, Harold Hammaffiliated pipeline company. In the same week that Enable and XTO agreed to the long-term commitment, Hiland issued an open season call to expand its exisiting crude transporting abilities on the Double H Pipeline. The 488-mile line is currently under construction,

and originates near Dore, N.D., and Sidney, Mont., and ends at Guernsey, Wyo. The second open season call for the pipeline will add capacity and pump stations. By the fourth quarter, Hiland could move up to 100,000 barrels of oil per day through the Double H pipeline.

THEBAKKEN.COM

17

BAKKEN NEWS

New Quantum Facility To Mimic Dakota Prairie Refinery

UNDER DEVELOPMENT: Dakota Prairie Refinery PHOTO: WBI ENERGY INC.

18

The BAKKEN MAGAZINE APRIL 2014

North Dakota’s demand for diesel fuel is currently more than 53,000 barrels per day.

The state produces roughly 22,000 barrels per day of diesel. By 2025, demand for diesel will exceed 75,000 bpd. Thanks to the Bakken and Three Forks formations, the state will soon be producing more than 1 million barrels of oil per day. To take advantage of the extreme supply and the forecast demand for diesel, a handful of projects will begin refining Bakken crude into diesel. Quantum Energy has just agreed to join the list. The company has purchased 80 acres of land adjacent to the Northstar

Transloading LLC facility near East Fairview, N.D., to build a 20,000 bpd diesel refinery.

“The Dakota Prairie Refinery in Dickinson has served as the model for our proposed Fairview Refinery and helped demonstrate to our funding sources the feasibility for our project as well,” said Stan Wilson, president of Quantum Energy. The proposed facility will operate as a topping plant, converting roughly one-third of the Bakken crude it processes into diesel fuel.

Once complete, the facility will produce 7,000 barrels of diesel per day. Annually, the refinery will generate revenue of $600

BAKKEN NEWS

North Dakota Diesel Supply and Demand SOURCE: DAKOTA PRAIRIE REFINING

80

Thousand Barrels per Day  Oilfield Demand Basis  Per Capita Demand Basis  State Production

70 60 50 40 30 20 10 0 2000

2005

2010

2015

2020

2025

2030

Northstar At A Glance: Multicommodity Transload Capabilities Near Refinery

million and employ 100 full-time workers.

The Northstar Transload facility broke ground in January and will offer a wide variety of services. The 180-acre terminal will provide unit and manifest switching and transloading services; indoor and outdoor storage; 160,000 bopd of outbound crude; 20,000 bopd of inbound crude; pipeline interconnects; 12-station truck unloading facility and once complete, 800,000 barrels of crude storage.

The Quantum Refinery model is very similar to the Dakota Prairie Refinery under construction near Dickinson, N.D. Diesel from both facilities

will be sold wholesale to local distributors. The DPR facility will produce roughly 6,500 bpd of naptha, which will be shipped by rail to Alberta, Canada. The naptha will then be used as a diluent for bitumen or as a chemical feedstock. The facility will also produce roughly 6,000 bpd of atmospheric tower bottoms (ATB). The ATBs will be shipped by rail to a cracker feeder in Montana operated by Calumet Specialty Products Partners L.P. The 300 bpd natural gas liquids produced at the facility will be trucked to a nearby gas plant.

OUTBOUND: Crude Natural Gas Liquids INBOUND: Gas & Oil Related Products: Sand, Pipe, Chemicals, Equipment Construction Aggregate/Railroad Ballast Cement Chemicals Building Materials Diesel Propane Boutique Oils Machinery Agricultural Products Food/Cold Storage THEBAKKEN.COM

19

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Stop by your local SDLG dealer to get an up-close look, and find out how SDLG uses design simplicity to improve reliability, lower costs, and pass the savings on to you. To find your dealer, visit sdlgna.com/BM.

The BAKKEN MAGAZINE APRIL 2014

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FMC Technologies, your measurement solutions provider, now offers complete fabricated skids for the upstream and downstream markets. The same experienced engineers that design the world-renowned Smith Meter® equipment can design and build skids to your specifications. Our direct offices provide immediate support, and inventory close to your operation to maximize your operations efficiency. For more information on how FMC Technologies has you covered from start to finish, visit www.fmctechnologies.com Copyright © FMC Technologies, Inc. All Rights Reserved.

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21

LOGISTICS

THE BUILDOUT: The Victory Silica frack sand facility commissioning process is close to complete. The plant will receive wet sand concentrate and run it through a dry screening process before it is stored or loaded directly into trucks.

22

The BAKKEN MAGAZINE APRIL 2014

LOGISTICS

ENTERING THE

FRACK SAND INDUSTRY Victory Silica’s three-phased frack sand network plan reveals complexities of market

By Luke Geiver Photos by VICTORY SILICA

Victory Nickel is not in the frack sand business. At least it wasn’t until the Canadianbased nickel mining and production company realized that its plan to expand a nickel mining operation in Northern Manitoba hinged on the economic viability of utilizing layers of sandstone situated above the nickel layers it was after. To make the nickel operation work, the frack sand at the mine had to generate revenue. After hiring Ken Murdock, an engineer with 25-plus years experience in frack sand and cement production, Victory Silica Ltd. was formed.

Murdock’s task for Victory Silica was simple: Create and execute a sound business plan for utilizing the frack sand sourced from the Northern Alberta mine.

Since taking over as Victory Silica’s CEO, Murdock has formed a three-phase plan that features a hybrid operations model developed from Murdock’s knowledge of frack sand distribution methods in Texas, frack sand processing intricacies present in Wisconsin and a long-term vision for making Victory Silica a presence in the Bakken before it’s ever produced a grain of sand from its Northern Manitoba mine.

Murdock’s efforts to date may offer a valuable individual tale of innovative thinking, but the evolv-

THEBAKKEN.COM

23

LOGISTICS

SAND BY TRUCK: The facility is roughly 16 hours by truck from the northwestern portion of the Bakken shale play.

SAND INCREASE: The conveyor belt brings sand into the bins before the bins can disperse the sand into trucks.

WET SAND BY RAIL: Rail cars from a Wisconsin sand mine are loaded with wet sand concentrate.

24

The BAKKEN MAGAZINE APRIL 2014

TOOLS OF THE TRADE: The loader was shipped and assembled at the facility. The loader is specifically used to take sand from the rail cars and load the product into the trucks.

ing story of Victory Silica also provides a rently, Bakken drilling teams are recording glimpse into the complexities of a market well lateral lengths that exceed 2-mile and approach 3-mile lengths. The number of at the mercy of rail. discrete fracture stages per lateral are also increasing, another variable that will force The Current Frack Sand Market By 2015, proppant consumption in the proppant usage in the Bakken to increase.

Bakken shale play will reach roughly 8.5 bil- When Murdock began his quest to build lion pounds, according to research by Pac- Victory Silica into a frack sand supplier, West Consulting Partners, an energy-based the overall frack sand market demand was intelligence firm. Sand-based proppant will underserved, he says. In North America, he represent roughly two-thirds of overall Bak- estimates the market was roughly 40 milken proppant consumption, with ceramics lion tons with only 20 million tons of sand representing the majority of the remaining production available. Since that time, sand total consumption volume. An increase in production has drastically increased and so per well proppant usage along with growing has demand. well sizes is driving the increase in proppant consumption, according to Alexander Ro- Victory Silica’s Market Entry bart, partner with PacWest.

Victory Nickel has four nickel projects In 2008, the average volume of prop- in Canada. The Minago mine in Northern pant used per well was roughly 2 million Manitoba is rich with nickel deposits. It’s pounds (1,000 tons) of proppant for a also layered over with roughly 32 feet of 5,000 foot lateral, according to the Univer- sandstone. The sandstone can make the sity of North Dakota’s Energy & Environ- highest quality domestic frack sand available mental Research Center’s Bakken Decision in Canada, Murdock says. But, it wasn’t unSupport System team. In 2010, the average til Murdock was able to show the value of well, completed on a 10,000 foot lateral the deposits in conjunction with his three(roughly 2 miles), used closer to 4.5 mil- phase plan that the Victory team was able lion pounds (2,500 tons) of proppant. Cur- to justify producing the sand and the nickel

THEBAKKEN.COM

25

LOGISTICS

TALL ORDER: The sand facility needs to supply Wisconsin-based sand to its clients before it can utilize sand sourced from northern Manitoba.

from the Minago mine. “Traditionally sand companies are private companies. There aren’t a lot of metrics out there to say what a frack sand company is actually worth,” he says. That all changed in 2012 when a handful of frack sand providers either issued an initial public offering (IPO) or acquired other operations, revealing asset valuations and perceived company worth.

Murdock likes to point to four key transactions that helped show the value of the Victory Silica operation. In 2012, Preferred Sands LLC acquired Winn Bay Sands and its assets for $200 million; U.S. Silica raised $200 million through an initial public offering; Hi-Crush Partners LP raised $225 million through an IPO and Emerge Energy Services raised $140 million through an IPO.

26

The BAKKEN MAGAZINE APRIL 2014

A feasibility study determined that the pit footprint of the Minago mine could yield roughly 12 million tons of frack sand.

When combined with Murdock’s business model, the sand from the facility could be sold with a $25/ton profit. But, before any sand was sold, Murdock recognized an element of the current frack sand market that was necessary for any sand to be sold.

Victory Silica needed customers before it could justify the expense to source sand.

To build a customer base, Murdock analyzed frack sand distribution models used in Texas and started to develop a frack sand processing plant near Medicine Hat, Alberta, that could process wet sand concentrate.

The Medicine Hat facility, called the Seven Persons dry frack sand plant or the

LOGISTICS

Locations of sand bearing geologic units sampled and locations of samples submitted by fine-aggregate mine operators.

Numbers in parentheses indicate the number of samples collected for that geologic unit. *Samples acquired from fine-aggregate mine operators in which the unit sampled could not be determined

 Deadwood Formation (41)  Minnelusa Formation (62)  Hulett Sandstone Member of the Sundance Formation (13)  Unkpapa Sandstone (6)  Lakota Formation (28)  Fall River Sandstone (21)  Lakota-Fall River Sandstone (1)  Fox Hills Sandstone (37)

 White River Group (2)  Arikaree Group (5)  Ogallala Group (8)  Outwash, valley train (1)  Terrace deposit (6)  Sand Hills Formation (3)  Alluvium (3)  Unknown* (6)

SOURCE: SOUTH DAKOTA DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

South Dakota Frack Sand?

If Murdock or other entities are interested in tapping into a new frack sand resource, they will have to look outside of western South Dakota. The S.D. Department of Environment and Natural Resources recently released updates on a study formed to determine the viability of sand from several locations in western S.D. According to the DENR, samples collected did not meet specifications recommended by the American Petroleum Institute.

The study reported sand deficiencies that included an unacceptable percentage of quartz in the particles. Frack sand should be roughly 99 percent quartz. Most of the sand collected was also too coarse or too fine-grained, incorrectly shaped and in some cases, particles were cemented together too tightly for screening.

Of the 256 samples collected, 243 were tested in a bulk sieve analysis process to determine grain size. Photomicrographs were also used. Although some of the samples may be suitable for frack sand with the appropriate crushing and screening process, the report concluded that “none of the sand in South Dakota could likely be mined solely as hydraulic fracturing sand.”

But, for parties still considering the state’s sand resources, there may be a glimmer of hope. The report also noted that budget constraints limited the ability of the DENR to fully test the sand samples.

THEBAKKEN.COM

27

LOGISTICS

Bakken Proppant Consumption, by Type (billion lbs) Sand

RCS

Ceramics

10

7.6

8

8.5

5.6

6 4

8.3

3.9

2 0

Forecast 2011

2012

2013

2014

SOURCES: PACWEST ANALYSIS; PACWEST FRACDB / FRACFOCUS.ORG; COMPANY REPORTS; INDUSTRY SOURCES

2015

7P plant, is currently finalizing a commissioning stage. Once complete, the facility will have a 500,000 ton per year processing capacity. The 7P plant was designed to take wet sand concentrate from B&B Sands in Wisconsin. The sand is shipped to the plant via rail.

In a typical sand mining operation, sand will be mined, then taken to a wet plant in concentrated form. At the wet plant, the sand is washed to get rid of clays. Then, the sand is screened to remove over- and under-sized particles.

The sand will then be shipped to a sand provider to disperse accordingly. Once mined, the wet plant and screening operations are usually performed at the mine or at a separate location before shipment to the sand provider or user. The highest quality the sand will ever be is off the screen. “Every time you handle it after that, it breaks down,” Murdock says. In most cases, sand is handled several times

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The BAKKEN MAGAZINE APRIL 2014

LOGISTICS

after it is mined, going from screens to production storage; production storage to shipping storage; storage to transload railcars; railcars to transload sand storage; and finally, from transload storage facilities to truck before it arrives at the well head.

The 7P plant was designed to receive the wet sand concentrate in order to limit the amount of handling, Murdock says, and to keep Victory Silica away from the typical logistics challenges related to moving frack sand. In some cases, a frack sand provider is at the mercy of the client. If the client orders 30 railcars of sand but has no place to store it, lacks truck takeaway capacity at the time of sand delivery or changes an order, for example, from a 20/40 mesh size to a 30/50 mesh size without issuing enough lead time to the sand provider, as Murdock has seen, then all parties involved will be negatively impacted.

Murdock is mimicking what some

THE PRODUCT: Once complete, the facility will mainly supply sand grades of 20/40 and 30/50.

THEBAKKEN.COM

29

LOGISTICS

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The BAKKEN MAGAZINE APRIL 2014

frack sand suppliers do in Texas. The idea is to locate a dry sand processing facility near the main customer base. The wet concentrate is shipped to the dry sand facility for final processing and then trucked to each individual well site. “When I looked at the model initially I didn’t think it made sense,” he says, due to the moisture and raw state of the sand. “But, when you look at the handling savings related to the lack of demurrage charges for the rail cars full of sand with nowhere to go, it makes a lot of sense.”

With the trucking options, clients can receive sand quicker than if it is shipped by rail and they don't have to place their orders as far in advance.

The 7P plant is roughly 16 hours away from most wells in the Bakken. The specific target zone for sand sourced from the facility will be in the Montana and southern Saskatchewan portions of the play. When the Minago mine is fully running, the 7P plant will continue to use the Wisconsin-sourced sand along with the Manitoba product. And, in the meantime, Murdock sees the future of the frack sand market. He’s already acted on his vision, revamping the 7P plant mid construction to add capacity.

“Design changes during construction to increase availability, and therefore production capacity, delayed the project somewhat,” says Rene Galipeau, vice chairman and CEO of Victory Nickel, “but it will be worth it in the very near term.”

Due to the interest in Victory Silica’s product already, the growth forecasts for the Bakken, and the potential for more shallow gas drilling in Canada, he’s also building a larger dry frack sand plant near Winnipeg, Manitoba. The facility will be twice the size of the 7P plant and will process both Minago and Wisconsin sand. Because the product received at any of the processing facilities will come in the wet concentrate form, storing the sand will only require outdoor space to form a pile, as opposed to bags or enclosed area.

The 7P plant has already formed its first sand contract with a Bakken client. The contract stipulations were different than what Murdock, and Tim Barth of B&B Sands, initially saw or experienced roughly five years ago. The current contract is more of a supply agreement contract as opposed to a take-or-pay contract popular five years ago. With the take or pay contract, if a client didn’t take the sand from the provider, the client still had to pay for a major portion of the total bill. “If we start to see more demand than we have supply, that might happen again,” Barth says. Regardless of future demand or supply impacts, Murdock doesn’t believe take-or-pay contracts will happen again. He is certain of one thing though. “The frack sand market is going to be a nice market for us to be in long-term.”

Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

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EXPLORATION & PRODUCTION

TRENDING NOW:

CEMENTED LINERS IN THE BAKKEN Why cemented liners could become a long-term staple of Williston Basin completion methodology

By Luke Geiver

The use of cemented liners in the Williston Basin has improved production for several operators.

For Whiting Petroleum Corp. and Fidelity Exploration & Production Co., the completion methodology has proven to be so effective, that each has planned nearly every future well in 2014 around the completion approach. During the DUG Bakken and Niobrara Conference held earlier this year in Denver, Francisco Fragachan, director of sales and marketing for Weatherford’s pressure pumping division, spoke to a large crowd about the evolution of completion practices in the Bakken. “There are opportunities for improving our completion effectiveness versus efficiency,” he explained.

Production increase summaries from both Whiting and Fidelity show just how effective the use of cemented liners can be. Kent Wells, president and CEO of Fidelity, a subsidiary of MDU Resources Group, gave analysts an update on the exploration and production company’s Williston Basin assets in early March, revealing the impact of cemented liners. According to Wells, a Three Forks well completed in Mountrail County, N.D., the Purcell 3-4-33H, was completed using a cemented liner.

The well produced a 46 percent increase over 140 days when compared to a well completed during the same time, in the same area, using a different completion approach.

Whiting has gone exclusively to the cemented liner approach based on IP rates that have increased from 30 to 100 percent over wells completed in similar geologic areas with different completion methods.

“A lot of the industry is headed this way,” said Wells.

The Case for Cement Cemented liners are not a fad. Although Adam Anderson, vice president of the western U.S. for Baker Hughes, says that the industry still knows very little about the shale formations such as the Bakken, Niobrara or Eagle Ford, “the prevailing wisdom is shifting towards more frack effectiveness.” In other words, he told the DUG crowd at the panel discussion

SOLID UNDERSTANDING: Dustin Gentry, completions account manager at Trican Completion Services, is working to educate the field on a new ball-drop system specifically developed for cemented liners in the Bakken.

PHOTO: BBI INTERNATIONAL

32

The BAKKEN MAGAZINE APRIL 2014

EXPLORATION & PRODUCTION

THEBAKKEN.COM

33

EXPLORATION & PRODUCTION

featuring Fragachan, that today’s goal is in “breaking more rock,” a process that will yield substantial returns.

The concept of the cemented liner seems simple, and the basic premise is that it does break more rock. Cement is pumped on the outside of the well bore’s liner. In an open hole design, there is nothing around the outside of the liner, so when the rock surrounding the liner is perforated, the perforations go through the casing directly in the rock in random directions. However, the subsequent frack will follow the path of least resistance. In a cemented lateral, the perforations pass through a layer of cement first, which acts as a directional conduit, allowing the completions team to place perforations in a specific area along the segmented fracture zone. Knowing where the

34

fractures are going, in essence, allows the teams to justify placing more fractures per zone.

Dustin Gentry, completions account manager at Trican Completion Solutions, is wellversed in every completion approach on the market, specifically those geared towards the use of cemented liners. The concept of the cemented liner versus an open hole design is simple logic, he says.

“The cemented liner gives the operator a lot more control of where they are directing the frack. These shale’s will not produce as much naturally if you don’t frack it correctly,” Gentry says.

The ability to precisely place a fracture along an interval zone is allowing operators the luxury of breaking more rock. Most using the method are perforating an interval between four to ten times, Gentry says. “Before, it was

The BAKKEN MAGAZINE APRIL 2014

only one set of perforations per interval, but now with the ability to know where your frack generally is, an operator can put more fracks into an interval along several more contact points within the interval.”

The method involves the use of wireline which is used to set the bridge plug and activate the perforation gun. The plug is pumped into the hole where it bridges off a section of the well, followed by the use of the perforation gun to perforate the surrounding well bore region. “Plugand-perf is kind of king right now because that is what everybody is comfortable with,” Gentry says.

In the Bakken, that wasn’t always the case, however.

Anderson says Baker Hughes is one of many companies that have undergone a frack sleeve and plug-and-pert technology

evolution. In the Bakken’s early days, the play lent itself to sliding sleeves because operators were taking advantage of natural fractures in the rock. Combined with an open hole design, the fracture sleeves were installed between isolation packers that could swell and isolate individual sections of the well bore. Balls could then be pumped into the well bore to activate, and open individual fracture sleeves and the sleeve’s accompanying ports. The ball’s seat themselves into specifically sized ball seats in the sleeves and force the sleeve to move, which opens the ports. With the swell packers isolating each sleeve from the next, the fluid pumped into the wellbore along with the ball is diverted through the ports and into the rock formation. The process drastically reduces the amount of downhole time needed to com-

EXPLORATION & PRODUCTION

plete a well and can help to finish a completion job in much less time than the plug-and-perf method.

Sliding sleeves also involve downhole assembly tools that could move a single fracture sleeve along the well bore with the use of coiled tubing, allowing an operator to perform multiple fractures without bringing the downhole equipment out of the well. According to Anderson, one of the main reasons for the use of sleeves in the Bakken’s early days was directly related to the pumping horsepower capacity in the play. Today, there is more pumping horsepower than ever before, he says, and multiwell pads are making the benefits of the quicker sleeves less obvious. “People are thinking about applying more contact points,” he says.

Gentry and his team from Trican claim to offer operators

APPLIED HORSEPOWER: Although Trican offers pumping services, Dustin Gentry is excited for it's new cemented liner, multistage frack system. A system, he says, that could move equipment off of the well site faster.

PHOTO: TRICAN COMPLETION SOLUTIONS

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Bakken Completion Design Testing 300’

100’

the best of both worlds: the pressure pumping efficiency of using frack sleeves combined with the multiple fracture initiation points that you would get with a plug-and-perf strategy. If they can deliever, the new ball drop activated multistage frack system designed for cemented liner applications will play a more prominent role in the way Bakken wells are completed during the era of cemented liners.

Cemented Liners 2.0

100’

CEMENT EQUALS BETTER DESIGN: By using cemented liners, Fidelty Exploration & Production Co. has been able to decrease the spacing between each fracture on the lateral. The decreased spacing has increased the number of fracture initiation points on the lateral, and, increased well production.

SOURCE: FIDELITY EXPLORATION & PRODUCTION

By now, the use of cemented liners is becoming an undeniable trend. The practice is drastically increasing production for operators who use the approach correctly. But, just as operators are starting to adopt the completion method for great production yields, energy services companies are already making the method more effective. According to Gentry, the completion approach can still achieve greater production benefits, all in shorter time. Warren Miller, marketing manager at Trican, helped a recent Bakken operator complete 21 fracture stages in a single day. A typical plug-and-perf team can perform roughly four to

EXPLORATION & PRODUCTION

six fracture stages per day, he says.

Gentry and Miller are working to educate completion engineers and operators about the i-Frac CEM system. Trican developed the ball drop activated system for cemented liners. The company has used the system on more than 190 wells. The system is installed as an integrated part of the lower completion string.

Each fracture stage, depending on the length determined for the fracture zones, can contain one to 20 sliding sleeves. After a toe initiation device is activated, a single ball can be pumped into each fracture zone (which may contain up to 20 sleeves). The single ball will open all of the sleeves in the specific fracture zone, one-byone.

Once the balls reach the sleeves, the pressure causes the

ere Wh

w Flo n tio va o Inn

seats to expand, activating the sleeves, before the ball moves onto the next sleeve seat. “In the past, sleeve systems weren’t able to offer multiple fracture initiation points with just one ball. One ball could only open up one sleeve at a time. We can open up multiple sleeves with a single ball,” Gentry says. For an example, he says that on a 10-stage job, eight sleeves could be placed in each fracture zone. To open each of the sleeves in each of the zones, only 10 balls would be needed, but 80 fracture initiation points could be stimulated.

To deploy the i-Frac CEM system, the Trican team needs to know the pumping pressure the completion team plans to use, and the specific locations for the fracture stimulations desired by the geologists. “You can align

the placement of your frack port with the logs that show the highest level of hydrocarbon saturation, the highest level of natural fracture capabilities or the highest levels of porosity,” Miller says.

Trican uses pumping data during the completion to determine if each of the sleeve ports is opened. Each port will only open when certain pumping pressure and continuous flow rates are achieved, so based on the data that summarizes the pressure and flow, the team can verify if a port has been opened or not. Pumping pressure required for the system ranges from 10,000 to 15,000 Psi depending on the inner diameter of the horizontal casing string.

“People wonder how we know if all the sleeves were opened,” Gentry says. “We tell them you can only push so many

barrels through so many holes.

We look at the pressure spike signatures as the ball opens each sleeve in a stage individually. We compare the downhole pressures we are seeing along with the pressure pumping rates at surface and if you get to your maximum planned pumping rates, then all sleeves were opened in that stage.”

The beauty of Trican’s cemented liner-based, multifracture system is not just about the ability of the system to provide multiple fracture initiation points along the discrete zones by utilizing the presence of the cement conduit. It is also about speed. “We are talking minutes versus hours,” Miller says of the system. Because the process uses continuous pumping, there is not stoppage time to pump-down

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RIGHT FIT: Although the plug-and-perf method has been typically used with cemented liners, ball drop methods are now becoming available.

PHOTO: TRICAN COMPLETION SOLUTIONS

and pull-out wireline or stop to perform pump maintenance. The number of balls dropped is also significantly less than most ball drop systems. And the system can use dissolving balls, which eliminates the need to drill or mill out the balls before production can start.

The approach allows Trican to use the ball drop method during zipper fracks as well, reducing the time needed to complete the wells for the operators, and the time the Trican team has to be on the well site. The time saving aspect of the approach allows Gentry's customers to potentially save several hundred thousand dollars per well and move field personnel and equipment off a well in two days instead of five. “You can get 40 to 50 stages fracked per day on a well pad. That is what this technology has done,” Gentry says.

Trican’s excitement for its ball drop cemented liner system is justified. The company owns the patent to the system that Gentry says is the most mechanically sound on the market. There are, however, other major companies that are coming out with a similar system, he says. Although both Gentry and Miller believe in the Trican system, they are extremely certain that operators such as Whiting and Fidelity are examples of what the future of completions in the Bakken will look like. “I don’t know where the studies are on it [cemented liners], but the technology we have and the proven production increases from using it, say yes,” Miller says, “this is the thing to do.”

Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

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The BAKKEN MAGAZINE APRIL 2014

Hydro-Pod Takes the Guesswork Out of Recycling Frac Water As your frac flow back water quality starts changing, your treatment method should be able to change with it. A frac flow back testing lab and computer monitoring system are some of the many benefits offered by the Hydro-Pod. The Hydro-Pod, from RecyClean Services, is designed using 30+ years of hydro-frac experience and built upon mature technology. Using a proprietary process employing ozone and bi-metallic electrocoagulation, the Hydro-Pod eliminates the need for hazardous oxidizers and their associated liability. Processing at 2.5 to 3 BPM, units can be run in parallel to meet your daily processing requirements, and can also serve as a centralized processing facility to serve multiple well locations. Liability from transporting disposal waters is nearly eliminated.

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39

PRODUCTS & TECHNOLOGY

MILL HEAVY: Although Extreme Energy Services performs a wide range of services, the company has found its niche with mill out services necessary to remove plugs and frack sleeves before a wellbore can flow at full capacity.

PHOTO: EXTREME ENERGY SERVICES

40

The BAKKEN MAGAZINE APRIL 2014

PRODUCTS & TECHNOLOGY

RECORDING EXTREME BAKKEN

MILL

TIMES A small-time energy services provider records impressive mill out times with in-house design

By Luke Geiver

The Remi mill is named after a Louisiana toolmaker’s dog. The mill

was designed, in part, by Jesse Crone, regional manager for Extreme Energy Services LLC, to speed up milling times for horizontal laterals in the Williston Basin. EES formed in 2010 and also serves other oilfields in Texas and Louisiana, but is best known for its growing portfolio

THEBAKKEN.COM

41

PRODUCTS & TECHNOLOGY

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and case studies from the Bakken. Although it took Crone and his team a few months to gain client approval for the Remi mill’s use, the design work and explanation efforts put forth by the team to clients have paid off. EES has grown from a fourperson operation to a milling specialist that runs more than 14 technicians while turning away client requests for more milling services.

Originally, Crone and his toolmaker wanted to call it the scallop mill based on the mill’s head characteristics, but the name just didn’t do justice to the unique design. In fact, the mill’s design didn’t resemble anything the two had seen before.

“The design that we came up with on that mill is a little outside of the box of what a lot of people were drilling their sleeves with,” Crone says. Many mills resemble a honeycomb shape formed to fit into a specific pipe size.

When a Williston Basin well is completed using ball seat and sleeve or a composite plug method, a mud motor powering a mill head is used to mill out the sleeves or plugs post fracture.

Typically, the seat and sleeve or composite plug manufacturing company will recommend a particular type of mill most suitable to remove its products. The mill design offerings are vast, ranging in size and shape. After analyzing the performance of his team’s drill outs, Crone recognized a troublesome pattern with several of the mills. “We would consistently see the same type of wear on the mill every time it came out of the hole,” he says. After tweaking the design of the Remi mill three times based on the research and analysis of completed milling jobs, Crone is now confident in deploying the mill to drill-out sleeves anywhere in the Williston Basin.

Making the Mill

THE LEADING JOB SITE FOR THE BAKKEN OIL AND GAS PLAY. The Bakken magazine’s Bakken Jobs site is the leading website for oil and ŐĂƐ ŝŶĚƵƐƚƌLJ ũŽďƐ ŝŶ ƚŚĞ ĂŬŬĞŶ ĂŶĚ dŚƌĞĞ &ŽƌŬƐ &ŽƌŵĂƟŽŶ͘ ĂŬŬĞŶ :ŽďƐ ŝƐ the place companies go to connect thousands of professionals with jobs ŝŶ ƚŚĞ ĂŬŬĞŶ ƉůĂLJ͘ /Ĩ LJŽƵ ĂƌĞ ůŽŽŬŝŶŐ ĨŽƌ Ă ũŽď Žƌ ůŽŽŬŝŶŐ ƚŽ ŚŝƌĞ ŶĞǁ ĞŵƉůŽLJĞĞƐ͕ ĂŬŬĞŶ :ŽďƐ ŝƐ ǁŚĞƌĞ LJŽƵ ŶĞĞĚ ƚŽ ďĞ͘

42

The BAKKEN MAGAZINE APRIL 2014

When Crone arrived in Glendive, Mont., six years ago he had $120 in his pocket. He didn’t have a place to stay or a job lined up. He was 19 years old, his girlfriend was back home in Minnesota and his knee was still recovering from surgery.

“When I tore my ACL [anterior cruciate ligament] I didn’t have health insurance. The surgery cost $21,000 and the quickest way to pay it back was to move to the oilfields and work,” he says. “I went to Glendive to pay off medical debt. I didn’t have intentions to stay in the oilfields forever.”

Today, Crone is the regional manager of Extreme Energy Services, a job he earned after six years employed on a workover rig. He recently built a new house in Dickinson, N.D., for his girlfriend-turned-wife and his two daughters to live in. “Moving to the Bakken was the greatest thing that could have happened to us,” he says. And, for EES, it might just be Crone’s willingness to endure long hours on a workover rig or performing mill-outs. Working with his team on mill-outs inspired Crone to work with his toolmaker on the Remi. The success of the Remi has helped EES land jobs once reserved for major service providers like Baker Hughes.

'The name of the game in our business is simple. When you go on a job after the frack job is completed, you go in with one motor and one mill, and you want to be able to drill out a full lateral without pulling out of the hole. If you have to pull out of the hole and change tools, it costs a significant amount of money.'

Jesse Crone Regional Manager, Extreme Energy Services LLC

NOT THE REMI: Because EES is working to patent it's new Remi mill, the company would not provide a photo of the mill.

PHOTO: EXTREME ENERGY SERVICES

When the design work first started, the premise was simple: Find a way to mill out sleeves near the toe of the lateral as quickly as those near the heel. According to Crone, other mill designs were working great, but only near the heel of the lateral. “Towards the end of the well further out in the lateral you would start to see slower drill times,� he says.

To alleviate the slower times, the EES team designed a mill that offers a new, fresh milling surface as the motor pushes the mill further away from the heel. In a lateral section of a well, the ball seats and sleeves get smaller closer to the toe, so, to match the decrease in well bore size, the Remi was designed to offer a smaller cut face for the smaller well bore sizes, a process that creates a new cut face suitable for each sleeve still present in the wellbore. As each new cut face is exposed during the mill-out process, the time required to mill-out sleeves near the toe of the well matched those closer to the start, or heel, of the well bore.

Using the manufacturer recom-

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43

PRODUCTS & TECHNOLOGY

mended mills, Crone says, the average drill-out times with a standard sleeve would come in between 8 to 12 minutes per sleeve for those closer to the heel. But, towards the end of the milling process, mill times per sleeve would increase to 45 minutes to 1 hour due to the wear on the mill cutting face. “With the new Remi mill, the consistency remains in that 8 minute to 12 min-

ute range throughout the entire well bore.

So, if you look at the entire well bore and you knock off 45 minutes on 8 sleeves to 10 sleeves, you are knocking off 8 hours to 10 hours per job,� Crone says.

The EES team is currently on job 1,843 (each job is numbered and the team started on job 1,000). Of those jobs, 600 were performed using mills. Because of the experience EES has had using mills—

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on the composite plugs or sleevesâ&#x20AC;&#x201D;the team has been able to analyze what performs best. â&#x20AC;&#x153;The Remi mill has sold itself now,â&#x20AC;? Crone says, â&#x20AC;&#x153;based on the performance of it.â&#x20AC;?

Although EES offers several downhole services, its ability to perform mill, outs with one motor and one mill in quicker times compared to competitors has pushed the team to focus heavily on milling and drill outs. â&#x20AC;&#x153;The name of the game in our business is simple. When you go on a job after the frack job is completed, you go in with one motor and one mill, and you want to be able to drill out a full lateral without pulling out of the hole,â&#x20AC;? Crone says. â&#x20AC;&#x153;If you have to pull out of the hole and change tools, it costs a significant amount of money.â&#x20AC;?

Because of the Remiâ&#x20AC;&#x2122;s design to offer a new cutting face, it has kept the teamâ&#x20AC;&#x2122;s toolmakers busy, and, it has put a major emphasis on the quality of the mills made for EES. All of the downhole tools are certified by a third-party, and without quality tools, Crone says the business would struggle.

The changing completion methodologies have also made the entire team thankful for the Remi mill. Today, most wells are completed using more than 25 discrete fracture stages, a practice requiring more sleeves and composite plugs than ever before. The team is also excited about the multi-well pad approach to oil production. The Remi can bring wells on production quicker than the competition in many cases. â&#x20AC;&#x153;If they [industry] wouldnâ&#x20AC;&#x2122;t have changed over to these long laterals and the use of composite plugs and sleeves, we wouldnâ&#x20AC;&#x2122;t have business,â&#x20AC;? he says. But, thanks to a torn ACL and a dog named Remi, the mill out business for EES is good.

Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

IN PLAY

HORIZONTAL SERVICES: Through the merger, Allied Wireline will now have the completions abilities of Horizontal Wireline Services, a service that Allied felt it needed to expand in the Bakken.

PHOTO: ALLIED WIRELINE SERVICES

DATA SERVICES: Allied Wireline is working with GE Oil & Gas. The relationship allows Allied to utilize GE's equipment and know-how in addition to its own experience.

PHOTO: ALLIED WIRELINE SERVICE

A Bakken-Specific Merger

By The Bakken Magazine Staff

Allied Wireline Service service provider, says PeLLC opened a Dickinson, ter Brink, chief financial N.D.-based office in 2013. officer for Allied. The merger Through the acquisition of displays the demand for Bakken Pennsylvania-based Hori- oilfield service providers to offer as zontal Wireline Services many technologies and services as LLC, Allied has made the possible. In Allied's case, it meant necessary steps to be- uniting service providers from recome a serious Bakken source plays operating outside the 46

The BAKKEN MAGAZINE APRIL 2014

Bakken. The reason for merging wasn't about offering a new technology, however, says Brink, service providers need to fit the mold of the one-stop shop.

For Allied and Horizontal, both formed in 2010, the combined business offerings will not bring new services to the Bakken. “It is really just more about being able to do things better and faster than we were able to do on a standalone basis,” he said.

Through the merger, Allied will now provide a full suite of wireline services in the Bakken, including open- and closed-hole logging, completion services, perforations and reservoir analytics. According to Brink, the completion services provided by

Horizontal were in high demand in other shale plays. Horizontal’s completion capabilities will make Allied’s Bakken service offerings more robust, according to Brink, a necessity to establishing itself as an independent provider capable of delivering the same level of service and technology as the larger, global entities operating in the unconventional oil resource industry. “The market hasn’t seen some of the sophisticated tools we have outside of the major oilfield service companies,” Brink said.

“Our base [Bakken customers] is relatively new. We just got established in late 2013. We are in startup mode, but with the combined horsepower we have now,

IN PLAY

For cased hole logging applications, Allied can now perform several of the same services as the larger companies, including: cement evaluations, casing evaluations through magnetic thickness tools and multiple-arm calipers, compressed and pulsed neutron tests, multi-array sonic testing and production logging.

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we can grow more quickly than we could have otherwise,” Brink says.

One of the main advantages of the merger will be Allied’s access to Horizontal’s personnel and its expertise at completion services.

On the logging services side, Allied has already established its capabilities. When the company formed in 2010, it formed a relationship with GE Oil & Gas to use GE’s technology and know-how.

The strategic partnership with GE allows Allied to use tools designed to be shorter and lighter than other tools, qualities that reduce the need for drilling teams to go as deep into the formation of interest and allow the operating team to reach bottom quicker.

For cased hole logging

applications, Allied can now perform several of the same services as the larger companies, including: cement evaluations, casing evaluations through magnetic thickness tools and multiple-arm calipers, compressed and pulsed neutron tests, multi-array sonic testing and production logging.

“Obviously there is tremendous opportunity on the completion side,” Brink said. But, while the addition of Horizontal’s completion abilities is exciting for Brink and the Allied team,“there is also a continued opportunity for logging and reservoir analytics,” he added.

The opportunity for logging and reservoir analytics stems from current and pending regulations that already do or will require operators to

track cement pumped into the well for casing. And, although operators in the Bakken have completed over 6,000 Bakken wells and compiled historic-levels of data and core samples, most continue to core wells in an effort to maintain the ability to perform data analysis on future wells.

Although the merger is relatively new, Brink says the two companies are already looking for best practices and strategies used by each that can be applied to the Bakken.

“We expect this thing to be a very successful combination,” he said. “It positions us as a leading independent wireline company.”

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47

MAKING IT

ND Trade Mission Connects Bakken to Canadian Investors

By The Bakken Magazine Staff

Donovan Johnson is From KPMG LLP’s Merger and Acquisition Outlook Survey Report 2014 on a mission to connect Canadian investors, Which factor do you think will most facilitate deal activity in 2014?

25% businesses and del- Large case reserves/commitments egates with the Bakken. Opportunities in emerging markets 17%

In early June, Johnson, the North Dakota Trade Office’s director of resource management, is leading a trade mission to three Canadian cities, Toronto, Ottawa and Montreal. The goal of the eastern Canada trade mission is two-fold, he said. First, Johnson wants to link North Dakota government and agency officials to brief their Canadian counterparts on the state’s energy industry and successes. Second, Johnson will work to introduce and arrange a series of one-on-one meetings for N.D.businesses and project developers seeking capital, partnership opportunities, joint ventures or government contacts located in Canada.

“We want to communicate that the energy play in North Dakota is no longer a boom or bust scenario but a proven industry,” he says.

The trade mission will also focus on the use of unmanned aerial systems in North Dakota. The main stop for any participating Bakken entity will be in Toronto.

While there, Johnson and his team will connect businesses and project developers with investment capital firms, banks and other Canadian-based energy companies to present energy play opportunities in the Bakken oil play. “Toronto is Canada’s business and financial 48

Availability of credit on favorable terms

16% 16%

Improved consumer confidence Improving equity markets

9% 9%

Recovery of financial services sector

5% 3%

Improved employment numbers Other (please specify)

Beyond increasing revenues or cutting costs, what is the primary reason you will initiate a deal in 2014?

18% 17% 17% 14%

Opportunistic (i.e., target becomes available) Expand customer base Expand geographic reach Enter into new lines of business Introduce new products

9%

Financial buyer looking for profitiable operations and/or gain one exit

8%

Deploy capital

8%

Enhance intellectual property Invest in another function in the supply chain Defend against competition

capital and second-largest financial services center in North America.

If you are needing additional capital for your business or looking for possible joint ventures or partnerships,” Johnson said, “you should plan on going to Toronto.” Drew Wrigley, N.D.'s lieutenant governor, will lead the trade mission. He will be accompanied by members

The BAKKEN MAGAZINE APRIL 2014

4% 3% 2%

from the N.D. commerce department.

For companies interested in vetting Canadian-based firms, the U.S. Commercial Service will offer business matchmaking services to any interested party on the trade mission. The USCS can help determine appropriate matches and perform due diligence on Cana-

dian companies before helping to set-up one-on-one meetings.

Although the NDTO’s main mission is to link North Dakota and Canadian entities for nearterm Bakken business opportunities, part of the mission is geared towards helping current Bakken businesses with access to future markets around the globe.

MAKING IT

2013 NAICS Total All Merchandise Exports from North Dakota to Canada

OIL & GAS $809,034,882

30.5%

“Eventually, there will be companies presently doing business in the Bakken that will be exporting their product, service, expertise or knowledge to foreign markets,” Johnson said. “This trade mission can act as a precursor to those endeavors.”

The NDTO primarily works with N.D.-based firms that export products or services to international markets. Canada has been the state’s largest trading partner

MACHINERY PETROLEUM & AGRICULTURAL FOOD (except electrical) CHEMICALS COAL PRODUCTS PRODUCTS MANUFACTURERS ALL OTHERS $637,862,031 $364,081,682 $202,435,059 $151,826,640 $148,678,109 $342,565,501

24%

13.7%

since the state’s trading history began. The NDTO currently works with several Bakken-based businesses in the manufacturing and services sector, helping them to export their activities, Johnson said. Due to the success of the Bakken, the NDTO has accompanied numerous delegates from foreign countries to understand the technologies used to drill and extract oil and gas. “As a result of the successes of the companies

MARKETING

DESIGN/BUILD

7.6%

5.7%

5.6% 12.9%

NAICS=North American Industry Classification System

and technologies deployed, there are more Bakken-based companies that will eventually export their products or services to international markets,” he said. “This trade mission can act as a precursor to those endeavors.”

Since 2005, North Dakota’s merchandise sales in foreign markets have increased 173 percent, rising from $1.1 billion to $3 billion. Canada accounts for more than 60 percent of North Dako-

OWN

ta’s export sales, according to the NDTO. Any business, delegate or party interested in the trade mission should contact Johnson to join the trade mission. And, if the trade mission date does not work for any interested party, Johnson said other opportunities or options will remain for any N.D.-based Bakken business to connect with investors or others in Canada through connections made by the NDTO.

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