The Bakken Magazine - August 2015

AUGUST 2015

Energy Service Solutions Growth Strategies, Perspectives During Low Oil Page 26, 40

Plus

Why Analysts Predict Change In Bakken Page 50

AND

DMR’s Ritter Explains Impact Of New Legislation Page 10

Infographic

Rig Reduction, Movement, Production Page 14

www.THEBAKKEN.com Printed in USA

Performance Under Pressure Oil and gas companies don’t just need to comply with regulations at their facilities, they demand high performance and safety at every level.

GRINNELL Mechanical Products are designed to meet the rigorous demands and challenging environments of the oil field industry. GRINNELL couplings and fittings can make pipe joining safer, faster, easier and cost effective by offering an efficient alternative to threading and eliminating the need for welding. Additionally, our specialty products allow engineers and owners to build extensive piping systems from a single source. GRINNELL Mechanical Products offer complete solutions for upstream oil systems.

Find a solution that fits at www.grinnell.com or contact us directly at Grinnell.Solutions@Grinnell.com.

Mechanical Products

Safer. Smarter. Tyco.TM

CONTENTS

Pg 26

AUGUST 2015

VOLUME 3 ISSUE 8

PRODUCTS & TECHNOLOGY

Getting It Done No Matter The Price Red Deer Ironworks is led by Brett Tinnes and a strategic vision that makes the small shop representative of the modern Bakken energy service firm.

BY LUKE GEIVER

Pg 40

PRODUCTS & TECHNOLOGY

Pg 50

EXPLORATION & PRODUCTION

From Bakken startup to oilfield problem solver, Newkota Rental & Sales has shown how to navigate the fast times and the slow times.

of the Bakken

Connecting To Industry

BY LUKE GEIVER

4

The BAKKEN MAGAZINE AUGUST 2015

Never Underestimate the Rock Analysts explain why Williston Basin oil production has sustained in 2015, and why it might change in the future.

BY PATRICK C. MILLER

Proppant-delivered scale-inhibiting technology

Now you can build cost-effective scale inhibition into every fracture

Increase production and reduce maintenance costs with our unique proppant-delivered scale inhibition treatment SCALEGUARDŽ proppant-delivered scale-inhibiting technology is an encapsulated ceramic proppant infused with scale inhibiting chemicals to maintain optimum production and recovery rates from scale-prone wells, while reducing production maintenance costs.

SCALEGUARD technology can be blended with any product from our high performance proppant portfolio, without compromising the high conductivity of the proppant pack.

Scale-inhibiting chemicals are released into the fracture only on contact with water to minimize chemical usage and deliver efficient, long-term production assurance.

Now you can extend well and production system lifetime, and avoid the downtime and cost associated with scale cleanup, removal and disposal, all from a single, cost-effective treatment while you frac. carboceramics.com/scaleguard

CONTENTS

AUGUST 2015

VOLUME 3 ISSUE 8

EXPLORATION & PRODUCTION

EXPLORATION & PRODUCTION

THE RIG COUNT CURVE:

200

IN NOVEMBER 2014, LOW OIL PRICES BEGAN TO IMPACT THE NUMBER OF RIGS OPERATING.

Average Rig Count

175 150 125 100 75 50 25

2014

jan feb mar apr may jun

2013

jan feb mar apr may jun jul aug sep oct nov dec

2012

jan feb mar apr may jun jul aug sep oct nov dec

2011

jan feb mar apr may jun jul aug sep oct nov dec

feb mar apr may jun jul aug sep oct nov dec

0

2015

MOVING TO THE CORE: The five years from 2011 to 2015 shows that the core area has been good during high oil prices, and has become the focus during low oil prices.

Divide 23 Williams 64

Burke 7

Renville 0

Divide 30

Bottineau 3

Williams 95

Mountrail 77

McKenzie 72 McLean 4

Bottineau 0

Stark 7

Billings Golden 12 Valley 3

YEARLY - MAY DAILY PRODUCTION NUMBERS (barrels of oil per day)

Burke 5

Renville 0

Bottineau 4

Stark 16

Mountrail 72

McLean 0

363,951 May 2011

644,276 May 2012

The Unforeseen Scenario Rig reduction, movement and sustained production.

BY THE BAKKEN MAGAZINE STAFF

Bottineau 7

Divide 9

Burke 0

Williams 61

Dunn 33 Billings Golden 0 Valley 0

Stark 12

Bowman 1

May 2014: 189

812,083 May 2013

May 2015: 83

1,040,625 May 2014

The Current Bakken Service Model

BY LUKE GEIVER

8 ND Department of Mineral Resources:

Legislative Wrap: Policy Changes and the People to do it

12 Bakken News

Bakken News and Trends

From water usage to future oil prices, straightforward commentary from 2015 Bakken Conference & Expo presenters.

BY THE BAKKEN MAGAZINE STAFF

64 From The Parking Lot To the Oilfield, CEC Set To Provide Bakken Advances Major dignitaries and oil firms were on hand for the groundbreaking of North Dakota’s next big oil research lab.

The Bakken magazine was there too to find out why

BY THE BAKKEN MAGAZINE STAFF

6

The BAKKEN MAGAZINE AUGUST 2015

1,201,159 May 2015

6 Editor’s Note

60 Bakken Event Speaker Highlights

IN PLAY

McLean 0

Stark 0

10 Events Calendar Q&A

Bottineau 0

Mountrail 33

BY ALISON RITTER

DEPARTMENTS

Renville 0

McKenzie 129 McLean 0

Bowman 3

May 2013: 187

INFOGRAPHIC

Renville 2

Mountrail 70

Dunn 81 Billings Golden 3 Valley 0

Stark 7

Bowman 0

May 2012: 210

Burke 14

McKenzie 216 Dunn 75

Billings Golden 13 Valley 2

Divide 31 Williams 109

McKenzie 167 McLean 4

Bowman 4

May 2011: 175

Divide 34 Williams 75

Mountrail 86

Dunn 82

Bowman 2

Pg 34

Renville 0

McKenzie 123 Dunn 43

Billings Golden 3 Valley 3

Burke 18

ON THE COVER: Workers from the Bakken to the Eagle Ford and even Utah are dealing with new requirements due to low oil prices.

PHOTO: ANADARKO PETROLEUM CORP.

THEBAKKEN.COM

7

EDITOR'S NOTE

The Current Bakken Service Model The economic opportunity produced by the Bakken shale play has created a new breed of energy service company. From the time the play first started ramping up, through the rush to hold

Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

acreage by production and on to the infill development stage of the Bakken today, the environment for startups has been exceptional. Companies like Newkota Sales & Rental, a Minot-based entity formed in 2011 when two oilfield veterans left a much larger energy service firm to start their own unique flowback tank and rental service, have thrived the past few years. At their first client meeting, the two-man Newkota team was asked for four flowback tanks. Newkota had only built and paid for two. “We were excited at first, and then unsure,” Kent Kirkhammer, U.S. operations manager for Newkota, told us. “The next meeting they asked for 20.” The Newkota story in this month’s issue, “Getting It Done No Matter the Price,” shows how a Bakken startup evolves through periods of high activity to the current pace.

Newkota’s story is not unique. Many companies have found comparable success, and many are now also encountering a staple challenge of the oil industry––low oil prices–– which the Bakken hadn’t seen at this level. Brett Tinnes, 24, of Tioga, N.D., who oversees Red Deer Ironwork’s Minot location, had not been through an activity slowdown since he started three years ago, nor had his co-workers. Twenty-eight years old or younger, each is still figuring out how to learn from the veterans they talk to and navigate the current low-crude price environment. We featured Tinnes in this month’s story, “Getting It Done No Matter the Price,” because it was clear after talking to and being around him that he represents the new model of young energy service firm employee. Like many other industry workers, passionate but relatively new to the field, he is trying to block out the possible negatives associated with an activity slowdown and instead focus on getting the job that needs or can be done, done.

Getting the job done is linked to the opportunity presented by supply, demand and the price of oil, which we all know. But the simple nature of supply and demand or the impact the price of oil has on industry activity is not so clear when you talk with analysts.

Patrick Miller writes in his feature story, “Dealing With Rig Decline,” that consensus among analysts is nonexistent. Some believe production is set at current levels for years to come while others believe it will drop below 1 million bopd next year. They all make valid points, so who is right? It would take more space than an editor’s note to offer an answer, but the success of Newkota and RDI in the current conditions is worth noting, a theme each team touched on. The oil in the Bakken isn’t going anywhere, they both said, and, both added, “neither are we.” Again, without offering an answer to the question above, I don’t think any of us could go wrong picking the side that includes companies that have operated in the Bakken and made it.

For the Latest Industry News:

www.TheBakken.com Follow us: twitter.com/thebakkenmag facebook.com/TheBakkenMag 8

The BAKKEN MAGAZINE AUGUST 2015

ADVERTISER INDEX 53 AE2S

www.THEBAKKEN.com

19 Bartlett & West

VOLUME 3 ISSUE 8

16 Blackmer 48 Braun Intertec

EDITORIAL

5 CARBO

Editor Luke Geiver lgeiver@bbiinternational.com

24-25 Centek Group

Staff Writer Emily Aasand eaasand@bbiinternational.com

13 CHS, Inc.

Staff Writer Patrick C. Miller pmiller@bbiinternational.com

47 Clark-Reliance Corporation

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

44 Convey-All USA 22 Corval Group

PUBLISHING & SALES

20 DryRock Products

Chairman Mike Bryan mbryan@bbiinternational.com

23 Dunlop Protective Footwear

CEO Joe Bryan jbryan@bbiinternational.com

32 Energy Navigator 33 FALCON TECHNOLOGIES

President Tom Bryan tbryan@bbiinternational.com

55 Golight Inc.

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com

12 iLevel Digital

Vice President of Content Tim Portz tportz@bbiinternational.com

54 Independent Technologies, Inc. (WESROC)

Marketing & Sales Director John Nelson jnelson@bbiinternational.com

17 J-W Energy Company 2 Kimzey Casing Services, LLC

Business Development Manager Bob Brown bbrown@bbiinternational.com

46 KLJ Progress Solutions

Account Manager Austin Maatz amaatz@bbiinternational.com

57 KW Commercial

Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com

63 Light Tower Rentals

Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

59 MBI Energy Services 58 Midwest Industrial Supply, Inc.

ART

56 Miller Insulation

Art Director Jaci Satterlund jsatterlund@bbiinternational.com

62 NCS MULTISTAGE LLC 18 New Prospect Company

Graphic Designer Lindsey Noble lnoble@bbiinternational.com

38 NOV Fiber Glass Systems 67 Port of Longview

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.

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.

31 Port of Vancouver USA 43 Presto Geosystems 39 Profire Energy, Inc. 68 Quality Mat Company 21 RDO Equipment Co. 52 SBG Energy Services LLC 42 The Bakken magazine Webinar Series 29 Torrid Technologies Group 3 Tyco Fire Protection Products 49 Wacker Neuson Sales Amer.

45 Wanzek Construction Inc. 28 Wood Group PSN

COPYRIGHT Š 2015

by BBI International

TM

7 Worthington Industries 30 Zeeco, Inc.

Please recycle this magazine and remove inserts or samples before recycling

THEBAKKEN.COM

9

NORTH DAKOTA DEPARTMENT OF MINERAL RESOURCES

DEPARTMENT’S CUT

Legislative Wrap: Policy Changes and the People to do it.

By Alison Ritter

If you learn one thing during a Legislative session, it is how quickly things change.

You have to stay alert. It starts early in the session, when bills are being introduced. Dozens of bills come out every day and get scheduled for hearings. As a state agency, you can’t afford to miss one of them that may pertain to you. Every bill has to be read and prioritized based on how much it could affect the agency.

During the 64th Legislative session, the North Dakota Department of Mineral Resources tracked 65 bills that impacted the agency in one way or another.

Many bills centered on Human Resources related issues, such as sick-leave or qualifications for retirement, but there were also many bills that related to policy decisions or regulatory functions. Twenty-eight bills were of particular interest to the department because they would impact our day-to-day regulatory work. As the session progressed, those 28 bills were whittled down 10

to nine bills, with four being of major significance to our department.

One of the most important oil and gas bills to come out of the session was House Bill 1358.

A “super bill” of sorts, it compiled the best concepts of all the energy bills that had been introduced and combined them into one.

The first crucial part of this super bill appropriates $1.5 million per biennium towards clean-up of oil field related issues that occurred prior to Aug. 1, 1983. The department has begun assessing potential projects that will then receive funding based on the priority list laid out in the bill. The funding list is to reclaim land that was abandoned or was left in an inadequate reclamation status before Aug. 1, 1983, and for which there is not any continuing reclamation responsibility under state law.

Another part of HB 1358 appropriated $500,000 to conduct a pilot project for remediating salt contamination from soil. Sites

The BAKKEN MAGAZINE AUGUST 2015

TELLING THE STORY: After several years providing communication efforts for the Department of Mineral Resources, Alison Ritter has been recognized in industry as a Williston Basin expert.

PHOTO: THE BAKKEN MAGAZINE

of particular interest relate to the use of evaporation pits in the north central portion of the state between 1951 and 1984.

Other parts of the bill include the ability of the surface owner to petition the Industrial Commission to hold a hearing before considering extending the temporarily abandoned status of a well if that well has been temporarily abandoned for more than seven years. The commission may now also release spill information for a well that has spilled more than 10 barrels of fluid off of the location even if the well is on confidential status.

The remaining piece of House Bill 1358 expands the Oil and Gas Division’s regulatory authority over gathering

pipelines. The division was first given limited authority over gathering infrastructure by the 2013 Legislature, when it began requiring operating companies to submit when, where and how the pipeline was constructed and placed into service. Due to the passage of House Bill 1358, the division is authorized to require bonds on gathering pipelines, as well as request pipeline engineering design drawings, a list of independent inspectors, and the inspector’s pressure testing certificate now must be filed within 60 days of performing the test.

HB 1358 also allocates funding for research into the best available pipeline monitoring technologies available. With more

NORTH DAKOTA DEPARTMENT OF MINERAL RESOURCES

than 40,000 miles of gathering infrastructure expected to be laid in the state, it’s crucial that these lines are equipped with the best available technology in order to minimize environmental impact in the event a spill would occur. The division is then required to write feasible, cost-effective pipeline monitoring rules necessary for improving pipeline safety and integrity based on the results of the study.

The adoption of House Bill 1358 once again represents the state of North Dakota expanding regulations into uncharted territory. We were the first state to implement gathering pipeline rules (Colorado soon followed) and it continues to set the bar for other oil producing states. But the one question that generally follows the discussion of policy changes is do you have the people to do this?

The answer is yes. House Bill 1014 authorized a total of 22 new full-time-equivalent (FTE) positions for the DMR. Of these new positions, eight will be instrumental in getting the full Pipeline Regulatory program off the ground. The program envisions a pipeline program supervisor, three pipeline field inspectors and four support staff.

The department also received a reclamation specialist position to assist in oversight of the

reclamation projects that will take place as a part of House Bill 1358.

Other positions provided in HB 1014 will assist in day-today department activities as well as increased field inspection and enforcement. The Legislature has always been careful not to overstaff the department and has used a proven method of contingent positions in past sessions. This method was once again applied due to the recent downturn of oil prices. The department will receive one additional field inspection position should the rig count return to 140 and one additional position for each 15 rigs up to 200 rigs.

This would provide a total of five additional inspection staff members, as needed.

House Bill 1014 not only provided funding for additional staff, but it also appropriated $13.6 million towards a much-needed expansion of the Wilson M. Laird core library on the campus of the University of North Dakota in Grand Forks. The core library is home to thousands of feet of core samples used for studies by students and industry.

Core samples are essential to a scientist’s understanding oil and gas formations, regardless of age.

The more core that is available for study, the easier it is to recognize the subtle changes in the rock

that can lead to new exploration targets or completion techniques.

The expansion of the core library provides enough space for another 30 to 65 years of sample collection and additional lab space for research. The architect for the expansion has been hired and demolition will begin this summer so as not to interfere with the school year. Construction is expected to be finished in late 2016 or early 2017.

Other bills the department watched closely include Senate Bills 2015 and 2343. Senate Bill 2015 allocates much needed rental housing assistance for state employees living and working in western North Dakota. Senate Bill 2343 requires the department to supply fiscal notes to the budget section of the legislature when rules, orders, or policies of the NDIC impact state revenues by $20 million or more.

Finally, the division watched for the outcome of House Bill 1032, which expanded funding to the state’s Abandoned Well Plugging and Site Reclamation Fund, or AWPSRF. This fund is unique to North Dakota and has taken on many important funding roles. A portion of the gross oil and gas production tax feeds the fund up to $7.5 million a fiscal year, with a total cap of $100 million. This fund was

started as an insurance policy to assist in clean-up of “orphaned” sites when no responsible party can be found. It has now been expanded to assist in funding for the North Dakota Department of Health’s environmental clean-up fund and will also fund a pilot program under the North Dakota Department of Agriculture to connect landowners and tenants experiencing pipeline reclamation and restoration issues with an independent ombudsman to assist them in working with pipeline companies.

It took a team of several Mineral Resources staff members to keep up with the rapid pace of the 64th Legislative session. Team members meet weekly to report on, discuss, understand and attend legislative hearings. This approach will likely continue for the department as the next legislative session is likely to once again bring rapid change and excitement.

Author: Alison Ritter Public Information Officer N.D. Department of Mineral Resources 701-328-8036 amritter@nd.gov

THEBAKKEN.COM

11

Introducing Effective iLevel Digital Display Advertising

ATM-centered Digital Topper Advertising Drives Traffic & Generates Revenue

EVENTS CALENDAR

The Bakken magazine

will be distributed at the following events: 2015 North Dakota Petroleum Conference Annual Meeting September 21-23, 2015 Fargo, North Dakota Issue: September 2015 The Bakken magazine

OilComm

November 4-6, 2015 Houston, Texas Issue: November 2015 The Bakken magazine

Houston Oilfield Expo December 9-10, 2015 Houston, Texas Issue: December 2015 The Bakken magazine

NAPE Denver There are only

15Spots

Per Network

Availability is Limited – Advertise Today

Learn About Our

Affordable ND and MN Networks Receive 230,000+ impressions per network, per month*

Bismarck | Dickinson | Fargo | Grand Forks | Minot | Williston *Foot-traffic counts are calculated from total number of transaction per machine To learn more, contact us at info@ileveldigital.com or 866-746-8385 | www.ileveldigital.com

12

The BAKKEN MAGAZINE AUGUST 2015

December 9-10, 2015 Denver, Colorado Issue: December 2015 The Bakken magazine

The Bakken Conference & Expo

July 25-27, 2016 Grand Forks, North Dakota Issue: July 2016 The Bakken magazine

BAKKEN NEWS

BAKKEN NEWS & TRENDS

Pro-energy policies could have significant economic impact

14

TOTAL JOB CREATION IMPLICATIONS FOR U.S. 11 10 9 8 Million

A recent study on U.S. energy policy shows that over the next 20 years, pro-development oil and gas policies could create 2.3 million jobs, add $443 billion to the economy, increase tax revenue by $1.1 trillion and save the average household $360 a year in energy expenses.

The study—conducted by Houston-based Wood Mackenzie for the American Petroleum Institute (API)—also warns that proposed regulatory policies could have the opposite effect—reducing jobs, tax revenues and economic activity while raising energy costs and making the U.S. more dependent on foreign energy sources.

Wood Mackenzie analyzed the likely economic outcomes of U.S. energy policies that either remain relatively unchanged, become more constraining or become more favorable toward oil and gas development. Policies considered were offshore drilling, increased federal permits, approval of Canadian pipelines, repeal of the crude export ban and market-level exports for LNG and condensates.

With energy policies that put more constraints on oil and gas development, the firm projected that over the next 10 years, U.S. oil production would fall by 2.8 million barrels per day, 800,000 jobs would be lost, tax revenues

7 6 5 4 3 2015

Baseline

2020

2025

Pro-development

2030

2035

Regulatory constraints

SOURCE: WOOD MACKENZIE

would fall by $33 billion and average energy costs per household would increase $255 per year.

“The study contrasts the tremendous difference between the benefits from pro-energy policies and the negative effects of policy decisions that are anti-energy,” API president and CEO Jack

The BAKKEN MAGAZINE AUGUST 2015

Gerard said. “Energy is fundamental to our society, and thanks to American innovation and entrepreneurial spirit, our nation stands among the world’s leaders in energy production. America will remain a global energy leader only if we get our nation’s energy policy right today.”

Karen Kerrigan, president

and CEO Small Business & Entrepreneurship Council, and Paula Jackson, president and CEO, American Association of Blacks in Energy, each joined Gerard earlier this year to speak on a panel regarding pro-energy policies.

According to Kerrigan, business failures in the U.S. currently outpace business

BAKKEN NEWS

TOTAL GDP CONTRIBUTION IMPLICATIONS FOR THE US

$ Billions, Real 2015

1,800

1,500

1,200

900

600 2015

Baseline

2020

2025

Pro-development

2030

2035

Regulatory constraints

SOURCE: WOOD MACKENZIE

startups. She said small businesses will be significantly impacted either positively or negatively depending on the direction of national energy policies and cost of energy.

“Low energy prices have been a lifeline given the challenging economic climate,” Kerrigan added.

Jackson said that when it

comes to energy policies beneficial to minorities and people at all economic levels, her organization supports an “all of the above” approach which includes a diverse portfolio of energy options. She gets exasperated with those who claim that one energy source can simply be replaced by another.

Jackson stressed that the

key to getting people to make more informed choices on energy policy and voting for candidates who support energy development is communications and education. She said that many people get “sucked into the media narrative” and Washington, D.C, politics, but tend to make better choices when they know the full story.

“We should not have to choose between energy and the environment,” Jackson said. “It’s my great frustration that we have to choose one or the other.”

THEBAKKEN.COM

15

BAKKEN NEWS

Fitch Ratings: Railcar phase-out process will be costly Regulations for railcars transporting crude oil will be costly for railcar manufacturers and lessors given their short implementation time frames, according to Fitch Ratings—a leading provider of credit ratings, commentary and research. With all mandatory expenses being paid at the top of securitization waterfalls, certain outstanding railcar ABS transactions could see decreased available funds for interest and principal, depending on their respective levels of tanker concentrations, Fitch adds. Low crude prices could also hinder available funds.

The U.S. Department of Transportation and Transport Canada recently issued regulations that require tank cars constructed on or after Oct. 1, to

ere

Wh

In

of a North American fleet and a shared safety challenge.”

The final rule unveiled a new enhanced tank car standard and an aggressive, riskbased retrofitting schedule for older cars carrying crude oil and ethanol. Under this standard, new cars constructed after Oct., are required to meet the new DOT specification 117 design or performance criteria. Criteria includes the car having a 9/16 inch tank shell, 11 gauge jacket, half-inch full-height head shield, thermal protection, and improved pressure relief valves and bottom outlet valves. Existing cars must be retrofitted with the same criteria based on a prescriptive, risk-based retrofit schedule.

According to the DOT, trains meeting the definition of

a high-hazard flammable unit train (HHFUT), with at least one tank car with Packing Group I materials, must be operated with an electronically controlled pneumatic (ECP) braking system

by Jan. 1, 2021. All other HHFUTs must have ECP braking systems installed after 2023. The rule restricts all HHFUTs to 50 miles per hour in all areas and HHFUTs carrying cars that don’t meet standards are restricted to operating at 40 mph.

“In our view, the high excess spread structured into railcar ABS transaction as well as increased lease rates should cover a portion of the retrofit expenses,” said Fitch Ratings.

“Substantial increases in average lease could turn to foreign oil if lease rates were to increase

s low F n

o

ati

v no

meet the new DOT-117 design, which features thicker shells and head shields, heat-resistant jackets, thermal protection and improved pressure valves. The current fleet of railcars carrying crude and ethanol will either be completely replaced or retrofitted within 10 years.

“Safety has been our top priority at every step in the process for finalizing this rule, which is a significant improvement over the current regulations and requirements and will make transporting flammable liquids safe,” U.S. Transportation Secretary Anthony Foxx, said. “Our close collaboration with Canada on new tank car standards is recognition that the trains moving unprecedented amounts of crude by rail are part

Avoiding

Vapor Lock

“Anytime you pump crude with a lot of entrained gas, it’s more difficult to pump. Since installing Blackmer® pumps, we haven’t had any real vapor issues. Blackmer pumps are pretty hassle free and very easy to maintain.”

Tom Roberts, Field Supervisor • Slawson Exploration Co., Inc. & Pelican Gathering Systems, LLC

Process | Energy | Military & Marine

• Sliding vane pump design ideal for light crude with high vapor pressures • Self-adjusting vanes reduce maintenance, improve uptime • Consistent flow, even with varying inlet pressures • Superior suction offers excellent fluid lift, line stripping For more information, please go to: psgpumps.com/tb815b

16 %/.0 %DNNHQ .H\ ,QLWLDWLYH $G $8* LQGG The BAKKEN MAGAZINE AUGUST 2015

PSG 1809 Century Avenue SW Grand Rapids, MI 49503-1530 USA P: +1 (616) 241-1611

blackmer.com

30

BAKKEN NEWS

ENHANCED RAILCAR REGULATIONS

SOURCE: TRANSPORT CANADA

beyond feasible levels. Railcar lessors are likely to stagger the retrofits, which will avoid pronounced expense periods. In the near term, with limited pipeline options, including the vetoed Keystone XL Pipeline, refineries should maintain their healthy demand for shipment via rail.�

According to the Association of American Railroads, average weekly carloads of crude oil increased substantially in nearly every month from 2009 to 2014.

However, in 2015, as oil prices decreased, so did rail traffic in the first quarter. Although the average weekly crude carloads recovered in April and May, the continued low pricing spread will continue to negatively impact demand, Fitch said.

BAKKEN NEWS

DIVERSON

THIS PROCESS IS USED TO INCREASE PRESSURE IN OLD WELLS.

IHS: Refracking to remain a niche market A recent study conducted

by IHS Inc. found that horizontal well refracking will remain a niche market despite an increased interest from both exploration and production and oilfield service companies hoping the technology will reinvigorate drilling activity.

The IHS Energy Insight Report, “To Frac or Refrac: Prospects for Refracturing in the United States,” found that by 2020, refractured wells will account for roughly 11 percent of horizontal wells fractured in the U.S. Team researchers examined the entire population of U.S. onshore horizontal wells fractured since 2000, and through a robust

search and filter methodology, researchers were able to identify nearly 600 horizontal wells refractured. It reviewed current horizontal refracking technologies and approaches, as well as economics and effectiveness, then established baseline criteria and assessed the future potential of the technology using primary intelligence, rigorous research and proprietary data, according to IHS. The IHS report found that the Bakken has the greatest number of refractured wells in the U.S. plays, followed by the Barnett and Marcellus plays. IHS measured refractured success by comparing refracturing initial production (IP) rates to original

EXPERIENCE MAKES THE DIFFERENCE

COILED TUBING

SPOOLS CAN NOW REACH 10,000 FEET AND PERFORM 100 FRACKS PER WELL.

MECHANICAL ISOLATION THIS METHOD ALLOWS FOR BETTER PLACED, MORE DISCRETE STAGES.

IP rates. With the exception of the Bakken, most refractured wells have IP rates lower than the original IP rates. The Bakken anomaly is likely due to sub-optimal well specifications chosen for the original completion, said IHS. Due to the Bakken refracking results, and some overperformers in the Eagle Ford, IHS said that the overall average refractured well IP is equivalent

to 98 percent of the original well IP. The refractured wells also saw better 12-month decline rate than original well completions.

“In response to lower oil prices, E&P service companies in particular, have shown increasing interest in horizontal well refracturing,” said Christopher Robart, managing director, unconventional resources at IHS Energy, and the report’s lead author. “However, while

With 34 years in the business, NEW PROSPECT COMPANY provides experienced and specialized personnel across multiple disciplines to assist our clients in evaluating, designing, and executing their exploration and exploitation projects. New Prospect Company is an integrated consulting firm dedicated to the following services: Wellsite Supervision Drilling

(Air / Mud / MPD - UBD)

Completions Work Over Production

Project Management Petroleum Engineering HSE In-house Engineering Personnel Drilling and completion

DEEPER FOR CHEAPER® Our management team at New Prospect Company has approximately 500 years combined experience in well site supervision, engineering, and project management, both domestically and internationally, onshore and offshore.

New Prospect Company will dig deep and help make your project a success.

Our Experience, Your Benefit NEW PROSPECT COMPANY Contact Nate Saylor Business Development Manager Fort Smith, AR 72901 Phone 303-887-3337 Phone 479-783-6734 Cell 303-358-5552 www.NewProspect.com nsaylor@newprospect.com

18

The BAKKEN MAGAZINE AUGUST 2015

U.S. REFRACTURING WELL COUNT BY ORIGINAL IP QUINTILE

BAKKEN NEWS

refracturing has potential to leverage improved completion techniques to increase production while avoiding drilling and facilities costs associated with a new well, HIS research indicates there is a great deal of uncertainty about the viability of large-scale refracturing that must first be overcome.”

“The companies with superior acreage for new well development are not presently the prime candidates for refracturing,” added Robart. “Operators with less attractive assets will likely be more interested in advancing this technology in the near-term.”

The report found that three refracking techniques, including diversion, coiled tubing, or mechanical isolation, were most often employed in the wells studied. But, the study points out that each method has its advantages

100% 90% and disadvantages and it’s unclear 80% which technology will be domi70% nant in refracking practices.

IHS noted that refracturing 60% costs vary by method and job 50% size, with the diversion method 40% offering the lowest cost, but in 30% turn, it offers limited control.

20% Due to the technical challenges, 10% uncertainties and costs associated with current refracturing 0% methods, Robart said E&Ps that have a better portfolio of new well prospects are likely going to pursue those opportunities first, and save older assets for later.

“Refracturing technology is in its infancy, and a large-scale refracturing program is the most important step that can be taken to advance it; however, most E&P operators are cautious about investing significant capital before they see more positive results from other firsts,” said

Bakken

1st Quintile (Best) 2nd Quintile 3rd Quintile

Barnett

Eagle Ford Haynesville

4th Quintile 5th Quintile (Worst)

Note: All HZ wells in each play force-ranked into performance quintiles using original well completion IP rate normailized by lateral foot.

SOURCE: IHS

Robart. “To get better at something, you have to repeat it and refine the processes—you have to experiment. What refracturing needs now is a new innovator to step up, invest capital, and take

risks to refine the technologies and lower costs. For refracturing to advance significantly, we need the next George Mitchell to come forward.”

THEBAKKEN.COM

19

BAKKEN NEWS

01

02 30 % return rettur at $60 oil

22,000 barrels boe/d, 92 92,000 000 acres in the Permian Core

$2.35 BILLION 03

04 $400 in RK RKI debt

20

4 operating ting rigs

(with 2 more to come)

The BAKKEN MAGAZINE AUGUST 2015

WPX adds Permian acreage for $2.35 billion Well-known Bakken producer WPX Energy is branching out from the Bakken. Through its $2.35 billion purchase of RKI Exploration & Production Inc., WPX will soon be recognized in the Permian Basin. Less than one month after announcing it would ramp up its Bakken activity in 2015 by adding two drilling rigs to its Bakken operations, the Tulsa-based company revealed its 2015 growth plans are just getting started.

Through the acquisition, WPX will receive 22,000 barrels of oil equivalent per day of existing production along with 92,000 net acres in the core of the Permian Basin. The transaction did not

include RKI’s Wyoming assets, but it did include $400 million in RKI debt. The deal will be funded through the combination of long-term debt, additional equity and cash on hand. Financing was provided by Barclays.

According to WPX’s information on the acquisition, the company paid roughly $50,000 per flowing barrel and $12,500 per acre. The Permian move will not be new to some at WPX, as the current executive team has experience operating in the basin.

The current Permian rig count is four, but by the end of the year, WPX expects to add an additional two rigs.

Rick Muncrief, president and

BAKKEN NEWS

CEO of WPX, said the transaction was transformative for the company. The purchase he said, “drives high-margin oil growth, accelerates our portfolio transition to more liquids and solidifies our premier position in the western U.S., which enjoys the advantages of established infrastructure and higher realized commodity prices.”

RKI was formed in 2005 and has primarily focused on the Permian and Power River Basins.

Last year, the company doubled its net production to an average of 24,000 boe/d. It was also recognized as one of Oklahoma City’s fastest growing employers with more than 145 employees.

Who’s winning: OPEC or US shale oil producers?

The widely-held belief that Saudi Arabia and other members of the Organization of Petroleum Exporting Countries have chosen not to curtail production in an effort to squeeze market share out of U.S.-based shale players is true, according to John Auers, executive vice president of the Dallasbased consulting engineers firm. The truth about the situation, Auers also believes, is that “it appears that the U.S. industry might be winning the battle with OPEC.” Earlier this year, Auers and John Mayes, director of special studies, co-authored a piece that outlined their beliefs about the impact of OPEC’s market share strategy on U.S. shale producers. The piece detailed the reality that despite drastically reduced rig counts due to the low oil price created by OPEC’s internal production decisions, oil production in the U.S.—including the Bakken—has sustained itself. “The industry has been able to fend off the attack of drastically lower prices and even

continue to grow production,” they wrote. Saudi Arabia was attempting to reenact the same strategy it used in the early ‘80s, Auers said.

“You can’t blame them for trying the same strategy, but this is a different animal,” he said.

“This is easier and less costly. You can produce a lot of oil at $60 to $70 a barrel. That’s what we’re learning, and we’re still improving.”

Although shale oil producers are just now proving they can continue retrieving $60 oil, there are other reasons than just OPEC’s decisionmaking for low oil prices. The deregulation of the oil markets by President Ronald Reagan in the ‘80s helped to establish upstream and downstream infrastructure along with the skilled labor and workforce needed for oil production, the Dallas-team said.

Today, oil production is at record levels in the Bakken, but it may not stay that way. In the Bakken, oil production will decrease to roughly 950,000 bopd sometime in the next two years. By 2025, production will increase to between 1.5 million to 1.6 million, however.

The price point for constant oil production should be between $60 and $70. Auers believes it will be $70.

BAKKEN NEWS

Halliburton shares 2015 acquisition, refrack plans The merger of two energy service giants—Halliburton Co. and Baker Hughes Inc.—will not take place until at least Nov. 15, following an agreement by both entities with the Antitrust Division of the U.S. Department of Justice.

According to the companies, timing agreements such as the Halliburton/Baker Hughes merger are normal with large, complex transactions.

The original announcement that Halliburton would acquire Baker Hughes for roughly $35 billion came in November last year. The combined company will maintain the Halliburton name and its current Houston headquarters. Dave Lesar, chairman and CEO for Halliburton, will continue to lead Halliburton.

Both companies have a huge

presence in North Dakota, specifically in Williston, Minot and Dickinson. Earlier this year, Halliburton announced it would move its field offices out of Minot to other areas in North Dakota. Baker Hughes still has an extensive field office in Minot.

For Lesar, the merger will “create a bellweather global oilfield services company,” and the transaction will combine the companies’ product and service capabilities to deliver an unsurpassed depth and breadth of solutions to its customers.

The success of Halliburton or any other energy services firm may not come easy this year.

During the company’s second quarter earnings call, Lesar called the current market the toughest he’s seen. “We believe many of

the smaller service companies are operating at below cash breakeven costs,” he said. For Lesar, there are three types of companies this year: those that are making a profit, those covering cash costs and those operating at a loss. Lesar said Halliburton may be one of the only firms to be making a profit.

For the second quarter, total company revenue declined by 16 percent, a number the Halliburton executive team compared to the 26 percent reduction in the worldwide rig count. North American revenue for Halliburton was down 25 percent. “While North American rig count declined 40 percent, our stage count declined less than 10 percent. Therefore, we believe that a customer flight to quality emerged during the quarter and this gives us reason to believe

that pricing declines will begin to decelerate,” he said.

Halliburton has infrastructure and service equipment that is well above industry needs. According to the global energy services firm, roughly 40 to 50 percent of all service equipment has been idled. The slowdown in activity has created a unique new cycle in service intensity. Since 2013, the average well site has doubled and pressure pumping has dramatically increased. Although bigger jobs mean more revenues and better equipment utilization for Halliburton, there is a downside. “Larger completions are taking their toll on pumping equipment. In fact, these factors point to higher equipment attrition rates for the industry,” Jeff Miller, president, said.

The downturn in activity has

BAKKEN NEWS

also allowed Halliburton to retool and improve its maintenance schedules.

The company is currently operating as efficiently as it has in company history. When a recovery in oil prices and activity does come, Miller believes North America offers the most upside and will recover the fastest.

While it waits for the recovery, the company has also made a major investment into a growing interest held by its clients: refracking. Most of the early horizontally drilled and hydraulically fractured wells were under stimulated, the company believes. “Though a relatively small market today, we see significant runway in the future [for refracking],” Miller said. “We anticipate that customers will begin to dedicate part of their annual spend to refracks.”

Halliburton has secured $500 million from BlackRock Inc. to allow the company the financial flexibility to move on any future refrack work that happens in the next three years.

HALLIBURTON IS TARGETING $1 BILLION IN ANNUAL FIXED COST SAVINGS

Enhanced Fixed Cost Absorption – Real Estate

– – – – –

Logistics Security Support Services Personnel Utilization Management

Halliburton offices / facilities

Baker Hughes offices / facilities

THEBAKKEN.COM

23

REGISTRATION No. 1774

NO FISHING. NO FAILURES. NO B.S. Our centralizers are made to withstand even the most brutal conditions.

Using a laser-cut, special steel alloy, Centek’s innovative single piece design creates optimum stand-off, cementation and flexibility.

From lateral shale operations on land to ultra deep water, Centek centralizers provide superior torque and drag reduction. And we’ve got customizable simulations to prove it.

Buy it once and count on it.

GREATER THROUGHPUT. NO DOWNTIME. MADE IN BOTH THE U.K. AND U.S.A. EXCELLENCE TO THE CORE

Centekgroup.com

TOLL-FREE

844-219-3200

PRODUCTS & TECHNOLOGY

26

The BAKKEN MAGAZINE AUGUST 2015

PRODUCTS & TECHNOLOGY

Getting It Done

NO MATTER

THE PRICE In Brett Tinnes, 24, energy service and manufacturer RDI has an area manager whose traits and skills are those needed by the new breed of oilfield worker.

By Luke Geiver

It’s early summer and Brett Tinnes is standing near the clubhouse of a Minot, N.D., golf course surrounded by oil industry workers, workers, ready to participate in this year's American Petroleum Institute golf outing. Oil prices are still below $65 per barrel, the magic number needed to reactivate the majority of fracking activities or drilling rig crews, and there is a detectable buzz that this golf gathering is much different than the previous year. The conversations held amongst golfers are different. As they speak in their carts or near the clubhouse, some of them dressed

in shirts embroidered with their company logo, others in polos, all waiting to be told where to go and when to start, they seem more subdued, and quieter than the previous year. It's as if they are there, but thinking about something else.

As Tinnes steps in front of the group to begin his announcements, it’s clear he fits in. Tinnes is short in stature, dressed in a blue polo and black golf shorts, his hat and glasses made for Saturday nights and riding in the truck, not birdieing the eighteenth.

Amidst the backdrop of golf carts and oilfield personnel attempting to dress

ALIGNING INVENTORY: Red Deer Ironworks Minot, North Dakota, team worked with its clients when oil prices started dropping to ensure all inventory on hand was right and would be needed.

PHOTO: RED DEER IRONWORKS

THEBAKKEN.COM

27

PRODUCTS & TECHNOLOGY

‘You can’t just go to Walmart and get this stuff.’

Brett Tinnes, Manager, Red Deer Ironworks

WOOD GROUP PSN www.woodgroup-psn.com

Corporate 406-433-8290 • Field Yard 406-482-4927

ONE NATION UNDER GOD

28

The BAKKEN MAGAZINE AUGUST 2015

XNLV149611

Where you want to be.

the part of midweek golfer, Tinnes is clearly with his people. Most likely, he wouldn’t have it any other way.

Growing up in Tioga, he watched his father work in the drilling rig business. After four years attending school in Minot and working part time for a steel supplier going boom in the Bakken, he took over the lead role for a small-team, small branch division of a unionized pipe manufacturer based in Red Deer, Alberta, called Red Deer Ironworks (RDI for short). Since the branch first opened in Minot in 2013, Tinnes has been at the helm of RDI’s most successful U.S. branch. At any given time, Tinnes has roughly $1 million worth of inventory on hand to keep up with client demand.

Through the local chapter of American Petroleum Institute, he has also found success as a leader in the regional organization, and whether he likes it or not, become a golf event orgranizer and fundraiser tasked with bringing together teams and funds regardless of oil price.

At the front of the crowd, when he opens his mouth and the words come out, his tone is soft with a hint of toughness to it like he is attempting be firm but humble when he speaks. Following his morning announcements about the day’s schedule, the golfers head in different directions, the carts appearing as large white ants dispersing to the grass. Later that day, when the golfing has ended and the one-time-peryear players park their carts and head to the clubhouse, Tinnes ditches a microphone shortly after it fails and shouts out the raffle winners without ever thinking twice of stopping his work of announcing. He is clearly tired, but trying to show enthusiasm after two straight days running a golf event instead of his recertification shop. As Tinnes would tell you himself, he likes to “make sure things get done.”

At 24, Tinnes has become a clear representative of the modern, young oilfield worker. He has seen the best of the Bakken and now, for the first time in his life, a slowdown of client calls and product

PRODUCTS & TECHNOLOGY

TRAILER READY: RDI doesn't sell trailers, but they rely on them to move flowback pipes and fittings to well sites across North Dakota.

PHOTO: RED DEER IRONWORKS

orders, creating an unfamiliar situation. If every young oilfield worker takes Tinnes’ approach in the future, there will be more companies like RDI finding ways to navigate and work in whatever environment and mood those annual golfers at the Minot API golf tournament seem to be in.

RDI’s 2.5-Year Journey

It took only two years for Tinnes and his team of 10 to make an impact in the Bakken. Admittedly, they could do even more with other locations in Watford City or Dickinson, Tinnes believes. The company manufacturers high-and low-pressure pipe, fittings, collars and a myriad of other products used in the completion or production side of the business. The company also tests and recertifies piping and other products in need of maintaince or evaluation. Every week, Tinnes hits the road for Williston and Watford City just to stay in front of customers, pick-up service orders or deliver finished product even if they could have been dropped off at a shop in Minot. Right now, that is his goal, to stay current, fresh and good with existing clients.

“Just like everyone else we all got hit up for price cuts. We are technically the bottom of the bottom because we manufacture. We can’t go any lower,” he says.

When oil prices started to show an impact in December 2014, Tinnes and his corporate leadership in Alberta all decided to

Rule No. 1 Never Lose Money Rule No. 2, Never Forget Rule No. 1 99.9% EFFICIENCY GUARANTEE 10MM | 15MM | 30MM | 45MM BTU TORRID FRAC WATER HEATERS

> NOW TAKING PURCHASE ORDERS < Contact us for a heating demonstration Office: 406.892.1535 Fax: 406.892.9060 Email: info@torridtg.com www.torrridtechnologiesgroup.com THEBAKKEN.COM

29

PRODUCTS & TECHNOLOGY

reduce their own pay and to reduce the fees they charged for products.

“There are only so many companies out there,” he says. “We take pride in our customer service. Making sure our clients won’t go somewhere else when prices are five cents cheaper is important.”

In addition to lowering its fees, Tinnes organized meetings with several entities to talk needs and logistics. “We asked them what they could use more of and what products

they wanted to have more of. You can’t just go to Walmart and get this stuff.”

While the new iron sales have not increased, the efforts of Tinnes have paid off in other ways. “One thing that benefited us in the slow period is that you didn’t see as many people buying new stuff,” he says. “You saw them trying to reuse and recycle more things.

Our service side maintained itself.”

The methods used in the Bakken to complete wells help to drive RDI’s main-

Smokeless, Reliable Flaring Solutions by Design.

Zeeco engineers a complete line of smokeless flares that raise the bar on lowering emissions.

But then, we do that literally by design.

In fact, Zeeco has earned an enviable reputation for going the extra mile when it comes to designing flares that meet or exceed EPA Quad O standards.

Operators across the Bakken trust Zeeco for reliable performance, efficient operation, and extra-long equipment life. Flaring solutions that are a breath of fresh air? Done.

Global experience.

Local expertise.

®

ZEECO® Enclosed Flare System

Open • Enclosed • High / Low Pressure Vapor Recovery • Rentals • Pilots Explore our global locations at Zeeco.com/global

Experience the Power of Zeeco.

Zeeco, Inc. 22151 E 91st St. Broken Arrow, OK 74014 USA +1 918 258 8551 sales@zeeco.com ©Zeeco, Inc. 2015

30

The BAKKEN MAGAZINE AUGUST 2015

7KH %DNNHQB$XJ LQGG

30

taince team usage. Because of the high water volumes, pressures and sand totals that flowback, the pipe wears down. “It is meant to last forever, but the sand eats it up,” he says. “Anytime you are mixing sand and pressure you are basically sandblasting the inside of the pipe.”

RDI, and other companies like it, can test the pipe for its integrity and repair worn spots if necessary. Some major completion companies or operators have internal mandates requiring pipe integrity testing every six months.

Although new pipe sales were slow the first three months of the year, the maintenance side has kept Tinnes team busy. The company has also strategically positioned itself to operate lean when times are slow, according to a company spokesperson.

RDI does it by watching inventory levels, spending and excessive work hours.

No one in the North Dakota branch is over the age of 28. And, none of them has experienced an oil industry downturn such as this, Tinnes said. Talk with Tinnes or look at his brief track record of success, however, and you wouldn’t know that. It was evident at the golf tournament, evident when you talk with him on the phone. He has the air of having been in the Bakken for many years and that he already understands how to be successful in it. Then again, all it really takes to understand Tinnes and the young, new class of oilfield worker experiencing all the Bakken has to economically offer, is to look at Tinnes representing RDI at the golf tournament. There he was on the golf course, standing amongst so many of his peers who work under the same standards and have the same responsibilities, the area manager in the blue shirt finding a way to mingle, talk, get in front of customers, make announcements, check work emails, hit a driver and, no matter what the price of oil is, get things done.

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

Are you staking your reputation on dirt?

Only secondary containments from FALCON TECHNOLOGIES give you complete peace of mind.

A spill into a dirt or gravel berm means an expensive cleanup and negative publicity. And a plastic liner won’t solve the problem because it can leak from tears and seams. With a secondary containment from FALCON TECHNOLOGIES®, a spill is completely recoverable, eliminating reportable incidents. Proven in more than 7,000 installations, our spray-on polymer liner is seamless, leakproof and resistant to weather extremes and most common oilfield chemicals.

Our products are engineered to protect® your investment, the environment and your reputation.

Secondary containment | Tank bases Water storage | Temporary site protection Engineered to protect falcontsi.com | +1 970 460 9156

©2015 Falcon Technologies and Services, Inc.

EXPLORATION & PRODUCTION

BEST OF THE BEST: The current operating fleet of drilling rigs in the North Dakota portion of the Williston Basin is the most efficient yet. The rigs can now reach spud-to-total depth in roughly two weeks, down significantly from the 2013 average of 45 days.

PHOTO: THE BAKKEN MAGAZINE

The Unforeseen

Scenario:

Rig reduction, movement and sustained production Despite the lowest rig count in years, North Dakota’s daily production has remained constant. Rig movements, efficiencies and other factors help to explain the unlikely situation.

By Luke Geiver 34

The BAKKEN MAGAZINE AUGUST 2015

Comparing the current North Dakota rig count to that of four years ago is an apples to oranges scenario. The count this summer has

ranged from 70 to 100, down significantly from the high 100s common the past four years. The numerical difference between then and now doesn’t indicate a massive change in oil production, however.

At a time when the rig count is at its lowest point in several years, oil production has remained consistent despite the belief by many that daily production would decrease dramatically. The belief, now disproven by May’s 70-rig production count, the state can still produce more than 1.2 million barrels of oil per day is based on the idea that as

EXPLORATION & PRODUCTION

MOVEMENT MATTERS: As the rig count has changed, so too has the movement of many rigs working in North Dakota. To achieve the greatest returns for new wells, operators have moved nearly all of their rigs to the core of the Bakken.

PHOTO: THE BAKKEN MAGAZINE

the rig count drops, the bopd also drops.

The current fleet of drilling rigs operating in the Williston Basin is the best of the best, capable of reaching spud to total depth in two weeks, according to Lynn Helms, director of the North Dakota Department of Mineral Resources Oil and Gas Division.

Many rigs operating several years ago took roughly 45 days to reach total depth. The combination of impressive rig efficiency and a better strategic approach to production has altered what many originally thought would happen with the advent of low oil prices and falling rig counts: decreased production.

For Helms, the rig efficiency and money management strategies devised by the Bakken’s operators may not increase pro-

duction, but production could be sustained for several years if oil prices stay at current levels.

“I think people are hoping prices increase and we can go back to growth mode. But, we are capable of sustaining production for a couple of years,” he said.

Rig Movement Ramifications

Since the beginning of the fall of oil prices into the $50 range, rigs have not only been stacked, they have been rerouted to specific areas of the Williston Basin. That area has now become a new buzz word in the Bakken known as the core. The movement of drilling rigs from the greater Williston Basin area into a specific region known for being the deepest part of the basin with the most stackable oil zones has

also helped to sustain production.

The core, like the drilling rigs operating today, is the best of the best for producing zones.

In May 2014, roughly 24 wells reporting for the month showed an initial production rate of 500 barrels per day or less.

This year, zero wells have come in with an IP of under 500. The core is showing why it is the area of retreat for operators looking to make the most money for their reduced investment. The numbers reveal that exploration and production companies have retreated to the core. And, according to Helms, three wells have come in with IPs over 3,000 barrels per day. “The core area they are drilling in is far more productive,” he said. “Companies are still really optimistic about Bakken drilling. It is just a matter of when not if,” he said.

Along with greater rig efficiencies and the retreat into the core by most operators, pressure pumping service costs have decreased and well production costs have gone down by roughly $1 million since last year.

believes that completions will take place at $65/barrel and drilling activities will ramp up at $70/b. “Companies are positioning themselves for that magic price point,” he said.

But, in some cases, companies are reacting to completion regulations that stipulate a well must be completed within one year after that well reached total depth. In June, roughly 125 wells were completed due to the one year time frame. July and August only had 20 wells, respectively, in need of completion. This December and January, however, will see another 100 wells per month in need of completion due to the one-year threshold. Regardless of price or regulation, the optimism and confidence by operators in the Bakken is real. Despite the 67 percent rig count drop from the previous year, the DMR reports that there has only been a 48 percent drop in permitting applications for new wells.

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

Production: Watching, Waiting On Price

Although drilling rigs are in the best drilling locations currently, oil prices will still impact activity levels in the play. Helms

THEBAKKEN.COM

35

EXPLORATION & PRODUCTION

200

Average Rig Count

175 150 125 100 75 50 25

2012

jan feb mar apr may jun

2011

jan feb mar apr may jun jul aug sep oct nov dec

feb mar apr may jun jul aug sep oct nov dec

0

2013

MOVING TO THE CORE: The five years from 2011 to 2015 shows that the core area has been good during high oil prices, and has become the focus during low oil prices.

Divide 23 Williams 64

Burke 7

Renville 0

Williams 95

Mountrail 77

McKenzie 72

Burke 18

Renville 0

Bottineau 0

McLean 4

Stark 7

Bowman 2

McLean 4

Stark 16

Bowman 4

May 2011: 175

YEARLY - MAY DAILY PRODUCTION NUMBERS (barrels of oil per day)

Burke 5

Mountrail 72

McKenzie 167 Dunn 82

Billings Golden 12 Valley 3

Divide 34 Williams 75

Mountrail 86

McKenzie 123 Dunn 43

Billings Golden 3 Valley 3

Divide 30

Bottineau 3

Dunn 75 Billings Golden 13 Valley 2

Stark 7

Bowman 0

May 2012: 210

363,951 May 2011

May 201

644,276 May 2012

EXPLORATION & PRODUCTION

THE RIG COUNT CURVE:

Renville 0

Bottineau 4

2014

Divide 31 Williams 109

l

Burke 14

Renville 2

jan feb mar apr may jun

jan feb mar apr may jun jul aug sep oct nov dec

jul aug sep oct nov dec

IN NOVEMBER 2014, LOW OIL PRICES BEGAN TO IMPACT THE NUMBER OF RIGS OPERATING.

2015

Bottineau 7

Williams 61

Mountrail 70

Dunn 81 Billings Golden 3 Valley 0

McLean 0

Stark 12

Bottineau 0

McLean 0

Stark 0

Bowman 1

May 2014: 189

812,083 May 2013

Renville 0

Mountrail 33

Dunn 33 Billings Golden 0 Valley 0

Bowman 3

13: 187

Burke 0

McKenzie 129

McKenzie 216 McLean 0

Divide 9

1,040,625 May 2014

May 2015: 83

1,201,159 May 2015

Fiberspar LinePipe Engineered to Perform

• Over 75 million feet installed and operating globally; from Canada to Patagonia and Siberia to Australia • First to meet all major industry standards: API 15HR, API RP 15S, CSA Z662 and others • Minimum design life of 20 years • 100% hydro-tested to 1.5 times the rated pressures prior to shipment Designed to meet your specific needs; from injection to production lines, single and multiphase applications.

nov.com/fgs © 2015 National Oilwell Varco | All rights reserved.

• • • •

amine reboilers combustors dehydrators gas production units

• • • •

heated seperators incinerators line heaters treaters

PRODUCTS & TECHNOLOGY

CONNECTING TO INDUSTRY This two-man Bakken business, Newkota Services & Rentals, represents the past, present and future of the energy services sector.

By Luke Geiver

40

The BAKKEN MAGAZINE AUGUST 2015

PRODUCTS & TECHNOLOGY

FLOWBACK SPECIALTY: Newkota got its start in the Bakken by providing a special flowback tank equipped with a set of diffusers that deflect pressure and volume to make the tanks more efficient and last longer.

PHOTO: NEWKOTA SERVICES & RENTALS

THEBAKKEN.COM

41

PRODUCTS & TECHNOLOGY

If the open-top tank designed by Jarod Seifert and Kent Kirkhammer to contain flowback fluid had failed in 2011, Seifert would have lost his truck and his house.

Had the patented fluid diffuser on the unique tank performed poorly, there would be no Newkota Sales & Rental, a Minot-based energy services firm founded by Seifert and Kirkhammer in 2011 that has experienced every opportunity and challenge the Bakken has created for those in the service business. Despite oil price-induced activity slowdowns, Newkota has found a way to overcome the Bakken’s first major lull, and like many of its competitors, the team is already making

42

real moves to grow in advance of the recovery. Though the Newkota blueprint written by Seifert and Kirkhammer may be tough to duplicate, the company has shown what it takes to profit at any per-barrel price.

The Time To Leave

Kirkhammer and Seifert, both Canadian-born former oilfield workers who entered the Bakken play at the beginning of the activity frenzy, were not always their own bosses. They worked separately in Northern Alberta and together at Pure Energy Services’ North Dakota operations. Pure Energy, a production and flowback company, was acquired by Minot-based FMC Technolo-

The BAKKEN MAGAZINE AUGUST 2015

gies in 2012. Seifert remembers working on the first wells in North Dakota trying to find the appropriate flowback and production approach for clients such as Whiting Petroleum Corp., Hunt Oil LLC and EOG Resources. “We were trying to figure out how to flowback the Bakken wells and get the best amount of production and still maintain the integrity of the formation,” Seifert says.

Although Kirkhammer was working in Pure’s operations side and Seifert eventually moved into sales, the two shared the same desire to break out on their own. “We tried to figure out some solutions for upcoming issues in the field,” Seifert says. With the looming

regulations against the use of open pits for flowback water, the duo had the problem they felt needed solving. In 2012, after months of discussion and debate, North Dakota implemented regulations that eliminated the possibility of using open reserve pits on well sites.

The regulations necessitated the need of storage and handling equipment for the fluids produced during well flowback. Preceding the release of the rule, Kirkhammer and Seifert left Pure Energy to start Newkota.

The Bakken Startup

“We started out of a garage. We had no investors,” Kirkhammer says. The duo did,

PRODUCTS & TECHNOLOGY

THE FOUNDERS: Jarod Seifert (left) and Kent Kirkhammer worked in the flowback segment before branching out on their own as a two-man crew.

PHOTO: NEWKOTA SERVICES & RENTALS

Instant Roads Over Soft Soils GEOWEB® S O I L S TA B I L I Z AT I O N

Create fast-to-deploy access roads and laydown areas.

GEOWEB®— Creating stable roads and pads for over 30 years.

Please direct all inquiries to distribute/represent GEOSYSTEMS® products to our Business Director at 1-920-738-1237.

V

GEOWEB®-confined granular fills require up to 50% less infill to bridge organic or soft soils.

V

Aggregate or sand infill is ready for traffic immediately, and virtually maintenance-free.

V

Build over frozen ground; reduce rutting at thaw.

PRESTO 800-548-3424 or 1-920-738-1328 V www.prestogeo.com

AP-7497

THEBAKKEN.COM

43

PRODUCTS & TECHNOLOGY

however, have the designs to an open top tank that included a diffuser. When flowback water comes out of the well before it can be put on production, the fluid pressure is high and the fluid contains sand, water and any chemicals used in the fracking process. The diffusers mounted on the top of the tank act as a filter to reduce the pressure and particles that enter the open tank. According to Seifert, the high pressure mixture can ruin the integrity of the tank and the diffusers can plug up. A new tank in some cases, may only last a few months. The Newkota design reduces the velocity and don’t plug. The first Newkota diffusers used in the field circa 2011 are still in use today and have never washed out, he says.

With a unique design dreamt up from Seifert after years of flowback and production testing work in Wyoming, Canada and North Dakota, the duo needed a manufacturer

44

‘We are building partnerships.

That is what they (operators) tell us. They say we are working together and that we aren’t working for them.’

Jerod Seifert, U.S. Sales Manager

to bring the Newkota tank to life. Through Seifert’s boyhood friend, Newkota had access to a Canadian manufacturer that could build the unique tanks.

Newkota could also pay 90days after receiving the tanks, a payback plan Seifert says was crucial in the early days.

After securing the capital needed to buy two tanks by leveraging their trucks, houses and family relationships, the two-man team met with their first exploration and production clients whom each had already known from previous dealings. “We went into

The BAKKEN MAGAZINE AUGUST 2015

the first meeting thinking we would have a request for two [tanks] and they wanted four,” Seifert says. Following the meeting, the team was excited but unsure how they would pay for more, Kirkhammer says.

During the next meeting, their client put in an order for 20 tanks. “It took off from there,” Kirkhammer says. Investments from family and increased loan amounts helped the pair bring the tanks to the field.

In Newkota’s early days, the pair was working 14 to 20 hour days performing tank moves and setting up locations

by day before performing accounting and safety certification work at night. “We were running lean and mean,” Seifert says with a laugh of disbelief. Today, the Newkota team looks much different. Both founders have relinquished their early do-it-all roles for office jobs geared towards strategy or sales. In 2014, a private investor acquired a portion of Newkota, bringing with it oilfield executive leadership that Kirkhammer says has helped to lead the company to growth, and through the current oilfield slowdown.

“It was scary relinquishing control,” Seifert says on the topic of hiring and growing the company from a team of two to twenty-plus.

The Modern Energy Service Firm

Five years after starting Newkota, the team has set an example for others on how to navigate the Bakken energy

PRODUCTS & TECHNOLOGY

STEAM SHOT: Using its steam heat system, Newkota can unthaw flowback lines in five minutes instead of the typical hour time frame.

PHOTO: NEWKOTA SERVICES & RENTALS

THEBAKKEN.COM

45

PRODUCTS & TECHNOLOGY

MULTIPLE OFFERINGS: Since starting with an open-top flowback tank, Seifert and his team have designed several new Bakken specific wellpad products.

PHOTO: NEWKOTA SERVICES & RENTALS

service business. Shortly after receiving positive feedback and the all-important revenue stream from its tank operations, the company began to offer other products or services that it felt weren’t readily available in the Bakken.

Steam units mounted on trailers or cube vans have been a major hit. In the winter, when pipes moving water or product from a tank to the well head freeze and downtime starts to accumulate, for example, Newkota will sit on a frack site with its steam units. On a given well site, downtime for a completion crew can cost roughly $10,000 per hour. In the event of a freeze-up, the company operating the stie will typically place an air heater on the section of frozen pipe and in 45 minutes, the heat will unthaw the pipe. With Newkota’s steam system—adapted from Canadian operations—the pipes can be unthawed in five to 10 minutes. An operator uses a steam wand attached by hose to the Newkota van or skid. The steam is pumped through the wand.

From wellhead ladders to special ramps that allow for increased traffic on a well site, Seifert and Kirkhammer say they’ve always tried to stay ahead of the need curve in the Bakken. “Getting companies that trust us and come to us as a problem solver,” Seifert says, “is a huge thing.”

Getting companies to understand that Newkota operates with integrity and makes the smallest thing a “big deal,” is even more important to the founders. As oil prices have dropped, so too has the company’s activity volumes in the Bakken. The team has even had to let a group of its workforce go until things ramp up again. To offset any jobs lost

PRODUCTS & TECHNOLOGY

The Solution for Accurate Level Indication

“Solids in Process?”

No Problem!

“Sticky Floats?”

Eliminated!

due to client pullbacks, the team is working to ensure the work it does will not require a revisit. And, they are providing transparency to all billing efforts to keep any client from questioning costs or becoming frustrated due to hidden charges.

According to Seifert, part of Newkota’s Bakken success is linked to its clients. “We are building partnerships. That is what they (operators) tell us. They say we are working together and that we aren’t working for them.” The other part of its ability to grow in good times or sustain in tough times is linked to its core team members, many of whom have been apart of the Newkota team from the early days.

Chris Williams, the North Dakota operations manager, came from Phoenix. Before taking over the company’s N.D., operations, he spent a lot of time in the field learning the equipment and approach Seifert and Kirkhammer wanted all team members to take. Kirkhammer believes that aside from quality products and services, the best salesman are the company’s employees. Newkota added several former coworkers to its team to aid in filling key positions.

Zeke Hanna, now assistant operations manager in the state, formerly worked with Seifert at Pure Energy. “When he found out I was starting my own company he called me and said, ‘I don’t care what I’m doing. I want to be on board.’”

Even James Rozell, the former boss of Seifert and Kirkhammer and now the company’s sales manager based out of Denver, joined the team.

Despite the slowdown, neither Kirkhammer nor Seifert have any hint of worry. “I’m optimistic about this year,” Seifert

Besides negating the concerns of Flashing Liquids in your application, the Jerguson® FlashProof™ Magnicator® Indicator has solved suspended solids and sticking float issues for level indication. Contact us to arrange delivery of the actual FlashProof design sample.

See More About the Solution and Ask for Your Sample at

Jergusonshalemag.com or Email us at

solutions@clark-reliance.com

16633 Foltz Parkway, Strongsville, OH 44149 USA Phone: 440.572.1500 www.clark-reliance.com solutions@clark-reliance.com

PRODUCTS & TECHNOLOGY

‘We started out of a garage.

We had no investors.’

Kent Kirkhammer, U.S. Operations Manager

says. “With the activity that is going on out there we just want to do it better than anyone else. That is our approach.”

The team has new projects and patent-pending equipment waiting to hit the market. Both founders follow the Bakken and the other plays they are operating in closely to look for trends and new regulations that will necessitate new products. Until the next round of growth occurs, there are no houses or trucks in danger.

“It is still exciting times in the Bakken,” Kirkhammer says.

“It isn’t going anywhere. Companies have so much invested in this.”

HEAT TRUCKS: The steam heat units are typically housed in the back of a large truck.

PHOTO: NEWKOTA SERVICES & RENTALS

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

Seeing Through to the End &Žƌ ŵŽƌĞ ƚŚĂŶ ϲϬ LJĞĂƌƐ͕ ǁĞ ŚĂǀĞ ƉƌŽǀŝĚĞĚ ĞŶŐŝŶĞĞƌŝŶŐ ĂŶĚ ƚĞƐƟŶŐ ƐĞƌǀŝĐĞƐ ƚŽ Ă ǀĂƌŝĞƚLJ ŽĨ ŝŶĚƵƐƚƌŝĞƐ ŝŶĐůƵĚŝŶŐ Žŝů ĂŶĚ ŐĂƐ͘ tĞ ŽīĞƌ ƚŚĞ ĨŽůůŽǁŝŶŐ ƐĞƌǀŝĐĞƐ͗ ŐĞŽƚĞĐŚŶŝĐĂů ĞŶŐŝŶĞĞƌŝŶŐ͕ ŶŽŶĚĞƐƚƌƵĐƟǀĞ ĞdžĂŵŝŶĂƟŽŶ͕ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶƐƵůƟŶŐ͕ ŵĂƚĞƌŝĂůƐ ƚĞƐƟŶŐ ĂŶĚ ŵŽƌĞ͘ dŽ ůĞĂƌŶ ŵŽƌĞ͕ ǀŝƐŝƚ ǁǁǁ͘ďƌĂƵŶŝŶƚĞƌƚĞĐ͘ĐŽŵ

The Science You Build On. &Žƌ ŵŽƌĞ ŝŶĨŽƌŵĂƟŽŶ ĂďŽƵƚ ŽƵƌ ƐĞƌǀŝĐĞƐ͕ ƉůĞĂƐĞ ĐŽŶƚĂĐƚ͗ <ĞŶ :͘ ,ĂĂŐ / ϴϬϬͲϮϳϵͲϲϭϬϬ

48

The BAKKEN MAGAZINE AUGUST 2015

Built to endure.

In

ather. e w f es o all typ

Night and d ay.

Built for extreme environments and most demanding applications At Wacker Neuson, we’ve leveraged more than 160 years of construction and industrial experience into the design of equipment that’s built to endure the most extreme environments, the most demanding applications, the highest requirements for safety and durability. And we back it all up with an experienced, certified service team that’s dedicated to keeping your equipment running at peak so you can stay on schedule and on budget.

Find us on:

www.wackerneuson.com

Heaters I Generators I Pumps I Lighting

EXPLORATION & PRODUCTION

50

The BAKKEN MAGAZINE AUGUST 2015

EXPLORATION & PRODUCTION

Never

UNDERESTIMATE THE ROCK

of the Bakken

Low oil prices and global economic concerns have yet to hurt Bakken production. Analysts say that could change, but probably only temporarily.

By Patrick C. Miller

If Hollywood ever makes a movie about the Bakken, the Rocky movies of the ‘70s and ‘80s might provide a good storyline. Like Rocky

Balboa—the self-named Italian Stallion boxer in the 1975 hit movie “Rocky”— the Bakken has taken punch after punch from powerful, resource-rich adversaries, yet refuses to go down.

In fact, contrary to predictions earlier this year that the Bakken boom would soon go bust because of Saudi Arabia’s knock-out blow—the continuation of high production rates that caused global oil prices to plummet—North Dakota’s oil production has continued to match 2014’s record pace and might yet exceed it.

Jonathan Garrett, a principal analyst with Wood Mackenzie in Houston and the company’s Bakken expert, bucked the trend of forecasting a downturn in production. He projects that production in the Bakken will increase from an average of 1.1 million barrels per day in 2014 to 1.2 million barrels per day this year.

“Other analysts and Bakken watchers were surprised when they compared it to the Permian and the Eagle Ford,” says Garrett. “North Dakota is far away from major demand centers and major refining hubs. Because of the transport costs, people were quite worried about getting crude to market at a price that makes sense.

“I’ve not been surprised that pro-

MORE UNIQUE THAN EVER: Although much of the Bakken's landscape is unique, analysts believe that what lies beneath will once again truly shine despite the price of oil.

PHOTO: OVERLAND AERIAL PHOTOGRAPHY

THEBAKKEN.COM

51

EXPLORATION & PRODUCTION

duction has gone up,” he continues. “I’ve been surprised at the gains in well productivity have expanded this quickly and for this long.”

John Auers, executive vice president of Dallas-based Turner Mason & Co., also expected Bakken’s production to trend upward, despite low oil prices.

“I’m not surprised, but I am impressed,” he says “And not just with the Bakken, but also with the other tight oil basins. I would have expected production to fall a little more.

I’m impressed at how well they’ve been able to maintain production, even in light of this significant drop in prices.”

One trend that threw off the experts’ predictions was the assumption that a sharp decline in Williston Basin rig counts translated into the expected dip in Bakken crude production.

“In the North Dakota Bakken, I note that although

the number of active rigs is down around 59 per cent, actual production edged up in May,” says Patricia Mohr, a vice president with Scotiabank of Toronto, Ontario, and specialist in economics and the commodity market.

For this to continue, she says, “The market needs to see an actual supply side adjustment—as well as the big pickup in demand witnessed in the first half of 2015 to be assured that world supply and demand conditions will tighten in the second half of this year.”

Growing Stronger

The widely held belief that production is closely tied to rig counts might be a thing of the past. More wells spaced in smaller areas and improvements in drilling rig technology—more horsepower, greater torque and walking ability— mean that fewer rigs can be used to drill more wells. Therefore, the rig count is not nec-

MULTIPLE OPPORTUNITIES: Production totals will remain high thanks to multi-well pads that rely on efficient rigs and a backlog of drilled but uncompleted wells that could come online quickly.

PHOTO: THE BAKKEN MAGAZINE

essarily a reliable indicator of where production is headed.

“The capability of these rigs is a step above some of

the rigs that have been stacked and their predecessors,” Garret says. In addition, he attributes improvements in drill-

SBG continues to deliver on customer service. We have a proven track record of managing product, saving our customers money and headaches. Whether produced or fresh water, diesel fuel, or hydro-vac service, allow us the opportunity to prove our efficiencies and cost savings.

TRUCKING PIPELINES DIESEL FUEL HOT FRESH WATER HYDRO-VACS 52

• We offer a large trucking fleet with 200 bbl trailers to serve your fluid needs more effectively.

• Gathering Systems: Production & Fresh Water • Diesel Fuel for rigs, completions & gen sets We have your supply of #1 for winter needs • 30 mil bbls of Hot Fresh Water annually • New Hydro-Vacs with experienced/dedicated crews

SBG ENERGY SERVICES, LLC

4413 Sims St. | Dickinson, ND 58601 | 701-300-0895 | www.sbgenergy.com

The BAKKEN MAGAZINE AUGUST 2015

EXPLORATION & PRODUCTION

ing rig and well completion efficiencies, larger well sizes and the fact that producers are drilling their best Bakken rock as the three key factors leading to a production increase.

“This is not a normal drilling pattern that we’re do-

ing here,” Garrett explains.

“Right now, everyone’s drilling their best possible acreage.

Production grew in May over April. It went up over 32,000 barrels, and we were able to do that with 40 percent of the rig count.”

Auers notes that fracking technology is particularly well suited to engineering improvements, and engineers are constantly coming up with more efficient, faster and less expensive ways of doing things.

“All technology is amenable to improvements, but fracking is almost a manufacturing-oriented style,” he says “Manufacturing processes all lend themselves to continual improvements. That’s what happened, and it’s going to continue to happen. It’s anybody’s guess on how far you can go on that.”

Developing a better geologic understanding of the Bakken resource has also played a role in the Bakken’s strong performance.

“Sometimes people ask if all the big gains in productivity are behind us,” Garret says.

“I’d say probably not.”

The ability to geosteer the drill bit into the best oil-bearing shale layers of the Bakken

and Three Forks formations has paid dividends.

“Where you land your lateral matters, and your completion program and your optimal landing zone has to be unique for each well,” Garrett explains. “It’s not enough to be in the Bakken, You have to be in the section within the zone that’s going to yield the best results.”

In the same fashion as the resilient Rocky was eventually forced to retire, the Bakken’s ability to absorb punches doesn’t mean that they don’t hurt or take a toll. The need to reduce costs during the lowprice environment has meant less drilling in marginal areas, budget reductions and job layoffs. But that has also led to even greater efficiencies and innovative ways to reduce expenses.

“As they say, necessity is the mother of invention,” Garrett notes. “We’re in tough times and you have to make

THEBAKKEN.COM

53

665

+26

barrels/day month over month

from on average

July

barrels/day

EXPLORATION & PRODUCTION

Bakken Region New-well oil production per rig barrels/day 700 600

Rig count rigs 250

new-well oil production per rig

200

rig count

500 400

150

300

100

200

50

100 0 2007

2008

2009

2010

SOURCE: U.S. EIA

54

The BAKKEN MAGAZINE AUGUST 2015

2011

2012

2013

2014

2015

0

ne e rig

July

679

+16

thousand cubic feet/day month over month

thousand cubic feet/day

EXPLORATION & PRODUCTION

Bakken Region New-well gas production per rig

Rig count rigs

thousand cubic feet/day t 4,200 3,600 3,000

250

new-well gas production per rig

200

rig count

2,400

150

1,800

100

1,200

50

600 0 2007

2008

2009

2010

2011

2012

2013

2014

2015

0

SOURCE: U.S. EIA

800.557.0098 | www.golight.com

Revolutionary Lighting Solutions

D u r a b l e . . . Ve r s a t i l e . . . P o w e r f u l . . . G U A R A N T E E D !

When the power goes out or oil rigs go down, things are expected to get back up and running ASAP! More often than not, that means battling nasty weather conditions in the dark! Golightâ&#x20AC;&#x2122;s line of intensely bright and extremely durable remote control lights will help you get the job done safely and efficiently. The remote operation feature, allows you to dynamically direct the light where it is needed, when it is needed. Whether itâ&#x20AC;&#x2122;s an emergency situations or day to day operations, Golight has proven to be a vital tool in extending work hours and increasing productivity. CALL TODAY 800.557.0098

THEBAKKEN.COM

55

EXPLORATION & PRODUCTION

‘I’m impressed at how well they’ve been able to maintain production, even in light of this significant drop in prices’ John Auers, Executive Vice President, Turner Mason & Co.

it work. That’s part of it. Plus, there’s so much data now that’s readily available on Bakken wells, on Niobrara wells and Eagle Ford wells that you have a sense about what’s working, what’s not and what are the trends. More water, more proppant, a faster pump rate, slickwater fracks—these are all things proving to be optimal ways to complete an unconventional reservoir.”

In Rocky IV, a massive Soviet boxer tells Rocky, “I must break you.” According to Auers, who regularly speaks with con-

tacts overseas, the Russians believed that U.S. oil production from the Bakken and other shale plays were merely a deception that couldn’t be sustained once the Saudis decided not to cut their production. They and the Saudis were sadly mistaken, he says.

“I think people underestimated the best parts of the Bakken and the fact that those best parts are still getting better,” Garrett says. “I think they were looking for initial production rates or implied EURs to

cool off. Largely, that has not been the case. Plus, I think people were really surprised at how quickly costs could come down.”

Auers points out that when oil prices were high and the pace of drilling was frantic, oil service providers could charge top dollar. Now that the demand for their services has fallen, so have the prices they charge producers.

“The prices have gone down and they’ve cut their rates,” he says. “There’s a 15 to 20 percent savings rung out of the service part.”

As Garrett notes, “If we were having this conversation a couple years ago, I would have said the cost of a Bakken well was $9-10 million. Now there are folks quoting values that are less than $7 million on wells that are markedly bigger.”

A Happy Ending?

www.MillerInsulation.com info@millerinsulation.com 800-337-8145

Serving the Williston Basin since 1972, is a name that has been counted on for over 42 years for and scaffolding service. Fueled by a

has grown to become a contractor of choice throughout much of the country.

3520 East Century Avenue Bismarck, ND 58502-1393 Phone: 701-258-4323

3222 4th Avenue Southwest Fargo , ND 58103 Phone: 701-297-8813

3700 Salt Creek Highway Casper , WY 82601 Phone: 307-265-5646

3258 SW 110 Z Ave Dickinson , ND 58601 Phone: 701-225-5877

9124 Derrick Avenue Williston , ND 58801 Phone: 701-572-2718

2615 Industry Drive Cheyenne , WY 82007 Phone: 307-635-5311

56

The BAKKEN MAGAZINE AUGUST 2015

50 North 500 West North Salt Lake , UT 84054 Phone: 801-936-8352

Auers and Mohr agree that global events—as well as the laws of supply and demand—will have an impact on world oil prices and future Bakken production.

The Saudi punch to the head has been followed by body blows in the form of reduced energy demand from China’s declining economy, financial problems in Greece and the nuclear agreement with Iran that will bring even more Middle Eastern oil to an already glutted world market.

According to Mohr, the Iranian nuclear agreement with the five permanent UN Security Council members and Germany will complicate the recovery in oil prices. Iran has the equivalent of 180,000 barrels per day of crude stored in tankers, she notes, plus can probably bring on stream another 800,000 barrels per day within a short period of time.

“The global market will have difficulty absorbing all of this crude in the near term, though 2016 may see the biggest impact from Iran returning to the oil market,” she says.

EXPLORATION & PRODUCTION

Auers believes the impacts of the Iranian agreement and the economic situation in Greece won’t be as great as a struggling Chinese economy that generates less energy demand.

“I’m more worried about what’s happening in China,” he says. “It’s hard to call it a collapse of their stock market because they’re still way up compared to last year. Chinese demand drives petroleum demand. It’s much more important in the oil industry than anything that happens in Greece.”

Mohr agrees, adding, “China is the second largest oil consumer in the world and has more potential to increase per capita consumption given its stage of economic development than in the U.S. China is now the world's biggest auto market and—depending upon decisions made on technology—should be a strong gasoline market going forward.”

Auers thinks a slight dip in Bakken production will probably occur, although he doesn’t expect it to last for long.

“We’re going to continue to produce oil out of the Bakken in the million-plus range,” he says. “It could fall below a million barrels a day in North Dakota in the next year or two, but not a lot below. Longer term, I’m pretty bullish that it’s going to get back up to the level we thought it would be at before—1.5 million barrels per day or maybe more.”

Mohr’s outlook is that WTI oil prices will remain low in 2016.

“While world capital spending on oil exploration and development has dropped 20 to 30 per cent, the impact on world oil production has so far been very limited,” says. “This partly reflects an actual step-up in production by the major Persian Gulf countries—Saudi Arabia, UAE and Kuwait—in a bid to regain market share, and in fact, expand it in Asia—for example in China. It also reflects a significant lag between exploration and development and production in many countries.”

Garrett believes that conditions for

increased activity in the Bakken could start to improve by the end of this year or the middle of 2016. Wood Mackenzie’s view is that the WTI crude price will average $60 next year.

“I think at that point, you’ll start to see more operators start to hedge more of their production,” Garrett says. “They really don’t want to hedge or lock in at $52 WTI, but locking in at $60 might make sense. I think that will justify some increases in production.”

Mohr doesn’t expect production to go upward soon and thinks producers will hedge at a higher level.

“It is unfortunately premature for producers in the Bakken to step up production now,” she said. “I think if they can hedge forward at $65 it would make sense, but not at $52.”

Even Rocky was eventually force to hang up his gloves, but Auers says new developments in secondary and tertiary recovery methods or refracking could give the Bakken new life.

“A real breakthrough would be an economical source of CO2 that you could reinject back in to get the hydrocarbons out,” he says. “There’s a lot more oil down there than they’re pulling out. The technologies to do that aren’t that far away and aren’t much more expensive. The Bakken has a lot of long-term staying power.”

In other words, the final Bakken sequel is a long way from being made.

Author: Patrick C. Miller Staff Writer, The Bakken magazine 701-738-4923 pmiller@bbiinternational.com

BAKKEN PROPERTIES AVAILABLE WILLISTON, ND

WATFORD CITY, ND

Hotel Development Land

TIG Industrial Park

2.835 Acres Visible from Highway 2 Near Menards

155 Acres Industrial Land & 2,700 SF Shop Condos.

Industrial Land-21 Acres

Office-Shop Building (NEW)

Ready to Build. Zoned Heavy Industrial (M-2) City Water, Sewer, Gas and Fiber

7,500 SF w/ Approx. 2,300 SF Office and Mezzanine 3 Drive-in Doors, 1 Drive-in Door on 4.68 Acres.

Hotel Investment Property

New Apartments, RV Pads & Quality Workforce Lodging

Operating Hotel with Highway 2 Visibility Opened in 2012, High Occupancy, with a Major Flag Turn-key

Northstar Center 535 Acre Master Planned Subdivision Highway 2 presence Multi-family and Single Family Units Retail, Commercial and Industrial Lots

Hunters Run 350 Acre Master Planned Community Multifamily and Single Family Home Sites Commercial and Industrial lots Retail and Restaurant Pads-Build-to-Suit

701-660-3500

“The Bakken Real Estate Dream Team” Bakken Lodging Options - We Have Discounts!

scan for our current inventory

LEASE BUY INVEST RENT CONSULT FINANCE SELL ADVISE VALUE THEBAKKEN.COM

57

SF2ÂŽ Stabilization stronger surfaces, lower life-cycle costs, longer lasting

Midwestâ&#x20AC;&#x2122;s patented stabilization for marginal soils SF2 is proven to create stable bases using native soils, strong enough for E&P traffic on roads and pads. The resulting base will not degrade during rain or freeze-thaw. Installation is fast, can be performed year round, and the surfaces can be used immediately. We have seen time and time again that effective soil stabilization solutions can help your company avoid expensive and time-consuming maintenance efforts later on.

Successful in the Bakken Region of North Dakota and the North Slope of Alaska

330.456.3121

midwestind.com

Q&A

QA &

2015 BAKKEN CONFERENCE & EXPO PRESENTERS SHARE COMPANY PERSPECTIVE ON INNOVATION IN THE BAKKEN

So they let a little time pass. I would expect that this inventory gets slowly worked off as we move through the second half of the year.

Q

You’ve worked on the corporate side of the E&P business. How has that translated into what you’re doing with Northern Oil & Gas?

WHO: BRANDON ELLIOTT WHAT: Vice President of Corporate Development & Strategy for Northern Oil & Gas Inc

Q

From a nonoperator’s perspective, what do you see as the primary challenge in the Bakken?

A

There are a couple of issues we are seeing at this point. Obviously, the timing of well completions is a bit up in the air with all the talk of drilled-uncompleted-inventory. I think the DUC talk could be as much a way for operators to keep from showing the capital expenditures to the investment community and avoid completions during the winter and road restriction risks in the first and second quarter of the year. They also had a bit of contango in the market, and completion companies were not giving pricing relief as much as the operators were expecting.

60

A

I started on the institutional investment side of the table in 1998 and spent 12 years as an analyst and portfolio manager.

That has helped me “translate” what the investment community is saying and watching with what the management team means to say and draw attention too. Northern is my second opportunity on this corporate side of the table to help shape strategy and communication as it relates to the public markets. I have a good feel for what the street is watching and thinking because I spent years on that side. Hopefully, Northern’s communication and interaction with the street is improving and as a company we are better able to understand and appreciate what the buyside and sell-side is thinking and experiencing.

The BAKKEN MAGAZINE AUGUST 2015

system is CARB-certified and EPA approved. Additionally, the Cat G3306B gas generator set is the first Cat spark-ignited power solution to achieve EPA Mobile and Stationary certification.

Q WHO: RUSSELL GOSS WHAT: Territory Manager for Caterpillar & Gas

Q

How has Caterpillar Oil & Gas helped solve some of the associated gas production challenges in the Bakken?

A

Caterpillar, along with our local Cat dealers, has heard the call from customers looking to use or move associated gas in the Bakken. We have developed several offerings such as Dynamic Gas Blending, the Cat dual fuel system for drilling and well service engines, along with 135 to 400 ekW small gas generator sets that thrive on high-Btu associated gases like those found in the Bakken.

For Caterpillar, it was not only important to develop solutions that will consume these gases, it was also essential to maintain emissions compliance in doing so. The Cat DGB

You have a history of helping clients/ companies implement new technology into operations. What have you done that has worked with your Bakken or oil-related clients?

A

In addition to continuing to increase our flexible dual fuel and associated gas engine offerings, Caterpillar is also very interested in working with our customers for fuel treatment solutions. We recently announced making an equity investment in GTUIT, who provides flare capture and gas treatment technology to the oilfield. It is our goal to provide customers profitable, alternative means to capture and use flare gas with our combined treatment and engine technologies.

Q&A

moving. In fact, most wells that were sampled had water that was older than the 1950s, before most of the energy development activities in North Dakota and Montana. Therefore, continued monitoring of the groundwater resources into the future would be important to see if changes occur over time.

to Chicago, via Aux Sable and Alliance or on the Gulf Coast, via ONEOK, is sold at a $0.10 to $0.15/gallon loss to producers. This is because Bakken producers pay export freight whereas Marcellus producers benefit from having users of their ethane pay export freight.

WHO: JOEL GALLOWAY WHAT: Associate Director for the U.S. Geological Survey

Q

Even though the USGS study from last year found no evidence that fracking is affecting groundwater, why is it important to continue such studies?

A

There are many questions related to how the recent increase in energy development in the U.S. affect water resources.

The study by the US EPA, the study by USGS, and many other studies that are currently being done all help in understanding how relatively new and changing technologies related to oil and gas development affect water resources. Without good information, decisions and opinions are made based on assumptions, with sometimes detrimental effects both to the energy industry and to the environment. Sound, unbiased science can help provide good understanding for those who manage the resources and to help educate the general public on how energy development and our natural resources interact. Specifically in the Williston Basin, the USGS study did not show any measured effects of fracking in the wells that were sampled, however, it also found that groundwater in the area is very old and relatively slow-

WHO: WILLIAM GILLIAM WHAT: CEO of Badlands NGL LLC

WHO: GRANT LEVI WHAT: North Dakota Department of Transportation Director

Q

What are some of the challenges and opportunities associated with building a polyethylene plant in North Dakota?

Q

What are some of the projects planned for the remainder of 2015 and early 2016 in western North Dakota?

A

Some of the future projects include: • Lewis and Clark Bridge near Williston • U.S. Highway 2 between Williston and Minot • N.D. 23B in Watford City to junction of Highway 1806 • Complete four-laning of U.S. 85 from north of Alexander to Williston • N.D. 23 roundabout construction at Johnson’s Corner Intersection • New Interchange at Exit 56 on I-94 near Dickinson • Dickinson State Avenue overpass construction • New Town Main Street reconstruction

By far the biggest challenge to valueadded hydrocarbons in North Dakota is securing market-priced ethane feedstock supplies. At this time, Marcellus oil and gas producers benefit from long term, 300 Mb/d agreements to sell Marcellus ethane at market Btu ethane prices. This 300 Mb/d of ethane is being exported to Europe and to India, and European users pay the market price plus $0.35/gallon in Marcellus to Europe freight. Marcellus gas production is presently 20 Bcf a day, and Bakken gas production will perhaps reach 2.4 Bcf a day by 2020. However, at this time Bakken ethane that is sold to Canada, via Vantage,

Q

In terms of infrastructure, what do you see as the primary challenge in the Bakken?

A

The entire transportation system across the state has been challenged with the rapid growth in traffic. From 2010 to 2014, traffic increased 26 percent across North Dakota and 71 percent on state highways in the oil impacted counties of western North Dakota.

Much of the state’s transportation system is not designed for that type of traffic. As a result, a tremendous investment to upgrade state highways, county, city and township roads is needed to move people and goods.

Thanks to the governor and state legislature, a historic amount of resources have been made available to build bypasses, four-lane U.S. 85, and upgrade other highways by widening roads, adding turning and passing lanes and road shoulder improvements.

A

THEBAKKEN.COM

61

ŽŶƐŝƐƚĞŶƚ ĨƌĂĐ ƉůĂĐĞŵĞŶƚ ŵĂŬĞƐ ŽƉƟŵŝnjĂƟŽŶ ƉŽƐƐŝďůĞ͘

dŚĞ ŵŽƐƚ ĞĸĐŝĞŶƚ ĮĞůĚ ĨƌĂĐ ŶĞƚǁŽƌŬ ƐƚĂƌƚƐ ǁŝƚŚ ƉƌĞĚŝĐƚĂďůĞ ĨƌĂĐ ƐƉĂĐŝŶŐ ĂŶĚ ƉƌĞĚŝĐƚĂďůĞ ƉƌŽƉƉĞĚ ǀŽůƵŵĞ͘

WƌĞĚŝĐƚĂďůĞ͗ DƵůƟƐƚĂŐĞ hŶůŝŵŝƚĞĚ ĐĂƐŝŶŐ ƐůĞĞǀĞƐ

hŶƉƌĞĚŝĐƚĂďůĞ͗ ƉůƵŐͲĂŶĚͲƉĞƌĨ

dŚĞ DƵůƟƐƚĂŐĞ hŶůŝŵŝƚĞĚΠ ĨƌĂĐͲŝƐŽůĂƟŽŶ ƐLJƐƚĞŵ ĐŽŵďŝŶĞƐ ƐŝŶŐůĞͲƉŽŝŶƚ ŝŶũĞĐƟŽŶ ǁŝƚŚ ĐĞŵĞŶƚĞĚ ĐĂƐŝŶŐ ƐůĞĞǀĞƐ ƚŽ ĚĞůŝǀĞƌ ƉƌĞĚŝĐƚĂďůĞ͕ ǀĞƌŝĮĂďůĞ ĨƌĂĐ ƐƉĂĐŝŶŐ ĂŶĚ ƉƌĞĚŝĐƚĂďůĞ͕ ǀĞƌŝĮĂďůĞ ƉƌŽƉƉĞĚ ǀŽůƵŵĞ͘ ĚĚ ƌĞĂůͲƟŵĞ ĨƌĂĐͲnjŽŶĞ ƉƌĞƐƐƵƌĞ ŵŽŶŝƚŽƌŝŶŐ͕ ĂŶĚ LJŽƵ ŚĂǀĞ ƚŚĞ ďĞƐƚ ĨƌĂĐͲĚĞůŝǀĞƌLJ ŵĞƚŚŽĚ ĨŽƌ ĂĐŚŝĞǀŝŶŐ ĂŶ ŽƉƟŵŝnjĞĚ ĨƌĂĐ ŶĞƚǁŽƌŬ ƚŚĂƚ ĚĞůŝǀĞƌƐ ŵĂdžŝŵƵŵ ƌĞƐĞƌǀŽŝƌ ƐƟŵƵůĂƟŽŶ͘ >ĞĂƌŶ ŵŽƌĞ Ăƚ ŶĐƐŵƵůƟƐƚĂŐĞ͘ĐŽŵ͘

ŶĐƐŵƵůƟƐƚĂŐĞ͘ĐŽŵ ª /$4 .VMUJTUBHF --$ "MM SJHIUT SFTFSWFE .VMUJTUBHF 6OMJNJUFE BOE 5IF 5FDIOPMPHZ BSF USBEFNBSLT PG /$4 .VMUJTUBHF --$

IN PLAY

LICENSE TO INNOVATE: Private industry executives and state leaders were on hand for the Collaborative Energy Complex groundbreaking ceremony. Here, Lt. Gov. Drew Wrigley passes off a hand signed license plate.

PHOTO: THE BAKKEN MAGAZINE

‘Making it happen:’ Collaborative Energy Complex to provide Bakken advances

By Luke Geiver

The next great petroleum with a building equipped with labs, engineering breakthrough will classrooms and meeting space.

This summer, a who’s who of happen in what is now a parkNorth Dakota dignitaries attended ing lot. The University of North Da-

NO MORE TALK: After several years pitching the idea, University of North Dakota College of Engineering & Mines Dean Heshem El-Rewini said he will soon be able to talk about what has been done and not what will.

PHOTO: THE BAKKEN MAGAZINE

64

The BAKKEN MAGAZINE AUGUST 2015

kotas College of Engineering & Mines has broken ground on its Collaborative Energy Complex, a unique facility that will connect the likes of Hess Corp. with first-year college students.

The yet-to-be built 37,000-squarefoot facility will replace an existing parking lot on the campus of UND

the groundbreaking ceremony that featured a creative rendering of the building, a race car appearance, front doors standing at the entrance of the parking lot and the customary gold shovels and hard hats. Lt. Gov. Drew Wrigley opened the ceremony by explaining his own father’s pride in

IN PLAY

The Collaborative Energy Complex will feature: • Nearly 37,000 square feet of research and teaching labs and customized spaces for students, faculty, and industry.

BAST

CRAMER

BURIAN

• More than 7,500 square feet of new lab space for the College of Engineering and Mines.

• A 40-vertical-foot High Bay Lab equipped with a 2 ton bridge crane.

• Solberg Family Student Success Center for all Engineering and Geology Students, with mentoring, advising, internships, industry interaction, enrollment services and more.

KELLEY

• Hess Innovation Lab for students to explore innovative ways to solve challenges facing our state, nation and the world.

• Hess 3D Visualization and Reservoir Simulation Lab.

REVVED UP: A student-designed, built and race car was showcased at the groundbreaking.

PHOTO: THE BAKKEN MAGAZINE

• Hess Drilling Simulation Lab. UND and why he too was proud to be a part of the fundraising efforts of the CEC that utilized a state-based match program that provided one dollar to every two dollars of private funding given to the CEC. Sen. John Hoeven, R-N.D., said the facility represents the hardworking spirit of the state and although the Bakken oilfields only five hours west of the facility helped to make the facility a reality, the people are responsible for bringing it to life. “It’s happening here because we are making it happen,” Hoeven said.

Rep. Kevin Cramer, R-N.D.,

was also on hand and followed Hoeven’s speech with special message. “To the private donors, thank you,” he said. “You have made a really good investment.”

Steve Burian, CEO of AE2S, an environmental engineering firm based in Grand Forks and CEC donor, reiterated Cramer’s point during his talk, and explained that A2S’s donation was self-serving because his firm knows it could have success hiring great talent in the future if it were connected to the CEC. Michael Bast from Hess Corp., thanked the University for approaching his team about

• Solberg and Hamilton Atriums with displays designed to educate students and visitors.

WRIGLEY

donating to the project. Over five years, Hess will donate $5 million and will be recognized with naming rights to several labs and areas throughout the center. “We look forward to tremendous, innovative discoveries that are sure to follow,” Bast said.

• Student study space and gathering areas.

• Physical connection to the Harold Hamm School of Geology and Geological Engineering.

• Easy access to the Wilson M. Laird Core and Sample Library.

THEBAKKEN.COM

65

The BAKKEN Magazine Marketplace

– Light, Medium, & Heavy Duty Towing and Recovery – Local Home Town business with our local home town rates – No inflated Oil Boom Rates here!

– Set up an account or call us for all your needs.

Commercial HVAC Industrial refrigeration Temperature controls Security & fire safety Frick® factory service Contact us: Johnson Controls 2320 12th Street North Fargo, ND 58102 701-293-1140

E3 Power & Water Generation Efficiency 1-844-337-6937 Introducing the latest Technology in Remote Utilities Fully Engineered Power & Water Delivery System

Save Money, Time, and Space Increase Efficiency, Profits and Productivity Call us today and visit our website: www.e3pw.com

One FREE Listing per Company transportation BROWSE CATEGORIES

FIND BROWSE COMPANIES

find it online at 66

The BAKKEN MAGAZINE AUGUST 2015

directory.thebakken.com

32572)/21*9,(: &20 7 ) :$6+,1*721·6 :25.,1* 3257

1 - 8 0 0 - 2 2 7- 8 1 5 9

ROCK drill site

\\

Q M A T. C O M 5-ACRE MAT DRILL SITE

MAT drill site

AFTER ROCK DRILL SITE

Disadvantages - Damaging native farm land - Loss work time due to unsafe work surface - Delays in drilling - Unable to access due to bad weather - Wasting unnecessary amounts of rock - Unnecessary extra cost - High reclamation expense

WORLDS LARGEST SUPPLIER

AFTER MAT DRILL SITE

Advantages - No reclamation cost - Reduce the environmental impact - Reduce the amount of rock on native farm lands - Minimize unnecessary accidents - Mats provide a safe and stable work surface - 24/7 all-weather access with no down time - Potential to drill one to two more additional wells per year - Reduce the amount of truck traffic on roads - No additional cost - Protect existing flowlines

MANUFACTURING SINCE 1974