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VOLUME 1 NO. 4

FEBRUARY 2013

The Shale

Resources

BOOM:

State of American Energy 2013

Frack to the Future 10

HERE

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COMES THE FOCUS:

UNCONVENTIONAL

Oil & GAS:

30

Industry

The Solar Energy Outlook for 2013

optimistic on

Cline Shale

liquids potential.

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Industry Data | News | Events | Auctions | Calendar | Travel | Tips | Energy | Classifieds


ENERGYLANDSCAPES.NET FINE ART PHOTOGRAPHY FOR THE ENERGY INDUSTRY

www.PBEMag.com

Robert D. Flaherty Photographer 5604 Colorado Avenue | Odessa, TX 79762 Robert@EnergyLandscapes.net 432-557-5777 | 1-800-675-2734

/PBENERGYMAG @PBENERGY

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FEBRUARY 2013

contents

LETTER FROM

THE EDITOR

Pbe Features 10 The Shale Resources BOOM: Frack to the Future 20

State of American Energy 2013

30

The Solar Energy Outlook for 2013

35

FOCUS: UNCONVENTIONAL Oil & GAS: Industry optimistic on Cline Shale liquids potential.

... one thing that we can depend on to remain constant, ironically, is change itself ...

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Before the earth was round, it was flat. Before there were cars, we could only run and walk. Before there were telephones, there was only postal mail. Before there was the internet, there were only telephones and TVs. Before there was once currency, there were many economies working independently. Before there was a global language, there were many languages. Before there was one world, there was separation and war. And today, the energy industry is in “Frack to the Future” mode, where fracking new shale plays is changing the conventional methods of production, which in turn, is creating a boom after the boom the industry is currently in the midst of. Hang on everyone because, HERE COMES THE BOOM!

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We live in the most exciting times--an era on the precipice of great change with great tools to communicate and bring us together in new and unprecedented ways. An era of great change in technological development to allow opportunities and methods of drilling, production, & exploration never before seen. But before this change, there was ridicule, opposition, criticism, and then all of a sudden, there was acceptance...then integration...and then a whole new way of life. That process of change never stops. The one thing that we can depend on to remain constant, ironically, is change itself. It’s man’s nature to improve, to move forward, to innovate, to create and to evolve into new and better ways of life. The question is, will this process of change play out the same in regards to the controversial, yet extremely promising future of the new fracking methods?

Other Editorials

15 Calendar of Events 17 Upcoming Auctions 18

PBE Cares

19

“Reading from the Right Perspective”

24

Energized Marketing Tips

27

Top 7 February Festivals and Events in Texas

40

PBE News Briefs: Basin, State, Nation, World, Government, OffShore

44

Impact Of The Boom - Top 10 Small Cities

46

By The Numbers: Rig Count, Top Drillers, Top Operators

49

This Week in Petroleum

52

PBE Classifieds

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Here at the Permian Basin Energy Magazine, we are embracing this era of change, and we work daily to inform, educate, and unite energy nations of the world to create a new-age sustainable future. Throughout these pages, you will be taken to new projects, given new opportunities and will be exposed to new innovation, new thought, new happenings, and new regimes. In this issue, we will be profiling some of the largest oil and shale plays and projects that are taking us to an entirely new level of production. We will be informing our readers of the current state of energy in America, the future outlook in the solar industry for the year 2013, plus much more that you don’t want to miss! We are excited to present you with the latest edition of Permian Basin Energy Magazine--it’s an energy adventure--always ever-changing--just for you!

Johnathan E. Venable Owner/Editor in Chief Johnathan@PBEMag.com

/PBENERGYMAG @PBENERGY

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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EDITORIAL CONTRIBUTORS

PBE MAGAZINE CONTACTS OWNER/PUBLISHER

OFFICIAL PHOTOGRAPHER

sales@pbemag.com 432. 559. 8848

robert@energylandscapes.net 432. 559. 8848

OFFICE ADMINISTRATOR

OWNER/GRAPHIC DESIGNER

debbie@pbemag.com 432. 559. 4170

Lion Design • Tampa, FL liondesign@gmail.com 813. 334. 8826

Johnathan E. Venable

Debbie E. Barnum

Robert Flaherty

JOHNATHAN E. VENABLE NEWS/MARKETING AUTHOR johnathan@pbemag.com 432. 559. 8848

Paul Leonardo

ACCOUNT EXECUTIVE

Michael Gutierrez

michael@pbemag.com 432. 889. 7785 CLASSIFIED SALES EXECUTIVE

Caryn Fleming

ART DIRECTOR/GRAPHICS

Luke Pawliszyn

Lukasz Design Studio West Hollywood, CA luke@lukaszdesign.com 310. 428. 2566

PASTOR RED MOLINA INSPIRATIONAL AUTHOR redmarmol@yahoo.com

classifieds@pbemag.com 432. 559. 8848

PRESS RELEASE & NEWS SUBMISSIONS Send press releases & other news to: news@pbemag.com

PUBLISHED BY: PBE Magazine, LLC. Permian Basin Energy Magazine 1901 E. 37th Street, Suite 202-D Odessa, TX 79762 Main Phone: 432. 559. 8848 service@pbemag.com

KEVIN M. WILSON, PHD PRESIDENT/CEO Blue Water Capital Advisors, LLC 218. 728. 8386 kwilson@bluewater-cap.com www.bluewatercapitaladvisors.com

www.PBEMag.com

© Permian Basin Energy, Inc. 2013 All material is strictly copyright and all rights are reserved. Reproduction in whole or in part without the written permission of PBE MAGAZINE, LLC is strictly forbidden. The greatest care has been taken to ensure the accuracy of information in this magazine at time of going to press, but we accept no responsibility for omissions or errors. PBE Magazine welcomes any comments, feedback, suggestions, and/or submissions for consideration for publication. These may be submitted to: service@pbemag.com.

JACK N. GERARD PRESIDENT/CEO The American Petroleum Institute 202. 682. 8000 www.api.org

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The Shale

Resources

BOOM: Frack to the Future

Many people are interested in the shale resources boom in the U.S. There are exciting things happening now that could lead to energy independence, according to some observers.

by Kevin M. Wilson President / Chief Executive Officer / Chief Investment Officer of Blue Water Capital Advisors, LLC

I

n my previous career I spent many years as a petroleum geologist, and I was personally involved in testing wells in oil shale over 20 years ago. I may be able to provide some insights to the investing public on how shale drilling works, what the impact of the “new” fracking techniques is likely to be, whether the new shale resource boom can lead to eventual energy independence for the U.S., and how to invest in the boom over the next few years.

What is Fracking? One question I often hear is simply, “What is fracking?” Basically, fracking involves mixing up a slurry of sand and water, with less than 1% (by volume) chemical additives stirred in, and then pumping that down an oil or gas well under high pressure to open up fractures in the rock. This induced fracturing helps improve oil and gas production dramatically in cases where the rock is “tight,” that is, where it lacks the permeability that would allow oil & gas to flow into the well bore to be produced. Shale is a type of rock consisting mostly of clay minerals which are layered in such a way that water, oil, and gas have great difficulty moving through it. By fracking it we can artificially get it to produce the hydrocarbons trapped between the clay layers. 10

The Probable Environmental Costs of Fracking Another question that pops up given recent events is, “What are the environmental costs of fracking?” Given the fact that certain harsh chemicals are used to treat the sand/water slurry, and that millions of gallons of water are pumped into the ground, one might expect some damage to the environment if anything goes wrong. That is true, and when a poor operator messes up a well, or the frack job is done too close to a fault zone, or if a frack job is done in very shallow depths near an aquifer, serious environmental damage can occur. I would point out however that fracking has been used by the industry since 1947, and has been done on literally hundreds of thousands of wells. I have done over 100 frack jobs on wells myself. What is different now is that these frack jobs involve really huge amounts of sand and water in many cases. The chemical additives are new also, but that alone is not the problem. Almost all wells that have been fracked have caused no damage because the sand stays deep underground, the frack fluid is

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

properly disposed of, and the wells have been operated by professionals. Every case of documented environmental damage has involved one of the factors listed above, but the main problem is almost always poor well operations. I believe that the right approach to assessing environmental risks is to conduct a cost/benefit analysis. I say this because ultimately society must decide what it wants, and that collective decision is best arrived at using a careful evaluation of the costs of failure and the benefits of success. This is no different than the decisions society has made about airline safety, car safety, the side effects of medications, or injuries in contact sports. In each of these cases people routinely die, but at such low rates of incidence that society has deemed each one of these activities an acceptable risk. Not that anyone thinks that the attendant losses are of no concern; rather, we as a society have determined that the collective benefits outweigh these often tragic individual costs.

as is normally the case in conventional (rotary) drilling. The key is that one needs to turn about 90 degrees to reach horizontal, but cease all rotation of the drill string (pipe). The industry developed a new technology to achieve this result back in the late 1980s and early 1990s. The procedure developed involves 1) setting a cement plug on one side of the hole at the depth where one desires to “kick-off” in a new direction; 2) pulling out the conventional rotary drilling assembly at the business end of the pipe string; 3) putting a small “elbow” or angled piece of pipe (often angled at just ¾ degree to 1 ½ degrees) on the “bottom-hole assembly” in order to “build deviation;” and 4) putting a down-hole “mud motor” (turbine) on the assembly below the elbow, with the drilling bit attached below the motor. The entire pipe string is then lowered into the hole, but is no longer rotated. Instead, mud circulates through the drill bit and the backflow of the mud back up the drill-hole passes through the turbine,

turning just the bit and its connecting piece. The elbow assembly assures that over a long depth interval the hole deviates towards horizontal. It might take 3,000 feet to turn 90 degrees, but steel pipe can tolerate that low amount of tension and won’t break, as long as it remains immobile (does not rotate). The chore of figuring out which direction the “lateral” or horizontal segment is going (which turns out to matter a lot) has been solved by the creation of mud pulse digital data transmission. This involves an instrument package in the bottom-hole assembly that sends real time data about tool orientation and the tilt of the bit back to the surface using sonic pulses in the mud system, which extends all the way to the surface. The data comes out on monitors in the “doghouse” (operations shack) on the rig’s drilling floor. Early horizontal wells could only build laterals out a few hundred feet, but now laterals can extend horizontally in an oil & gas target zone for tens of thousands of feet.

By analogy, fracking is the same kind of choice. If society wants the oil & gas, it must accept a non-zero amount of environmental risk. If the risk is deemed too high, then we will have to seek energy resources in some other way. Given the extremely low rate of incidence for fracking disasters, and the almost completely preventable nature of the few failures experienced, I personally come down on the side of permitting fracking, assuming that there are rigorous procedures and safeguards in place.

How Horizontal Wells Are Drilled Many people have asked me how it is that wells can be drilled horizontally when they start out drilling vertically. Some are aware that bending steel pipe is simply not tenable while it is rotating, FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Why Has It Taken So Long to Develop Shale Resources?

oil prices would be needed to make the shale plays economic, if ever.

It seems that it has taken a very long time to finally start to develop the vast shale resources of the United States. Indeed, we knew about the potential oil & gas resources of many shales over 50 years ago, yet they have not been really actively targeted until just 8-10 years ago.

The combination of new frack treatments and very long laterals, plus higher oil prices, is what has finally allowed our oil shales and gas shales to be commercially produced. Even so, an average well in the Bakken costs $8-$10 MM, requiring a crude oil price of around $90/bbl. for a profitable well. Under current conditions, the Bakken is estimated to contain about 24 billion barrels of oil reserves.

The reasons for this involve technology, oil prices, and economics. I personally drilled a test of the Cretaceous Niobrara Chalk (limey shale) play in the Denver basin over 20 years ago, with abundant signs of oil & gas while drilling, and yet with no success. I also remember drilling through the now-famous Devonian Bakken Shale in North Dakota in 1984, and there was abundant oil floating on the surface of the mud pit (an exciting sign of production potential) as we were drilling. Yet we didn’t even consider trying to complete that part of the well for oil production, since it was known to be nearly impossible at that

Can the US Achieve Energy Independence with the New Shale Resource Boom?

The reasons for the shale failures in the 1980s and 1990s were that we couldn’t drill long laterals (horizontal wells), and we used frack jobs in the shales that had the perverse effect of shutting down production rather than enhancing it. This happened because we used fresh-water fracking fluids whose chemistry caused the clay minerals embedded in the shales to expand rapidly, sealing off all fractures and preventing oil & gas from flowing to the well bore where it could be produced. Only recently has it become possible to treat the water chemically so that it can be used in fracking without causing this kind of “formation damage.”

“Resources” are listed by many observers as being in the area of 250 billion barrels of oil (BBO) in the Bakken play alone, which if true would rival the discoveries of Saudi Arabia and Iraq. However, energy resources are defined as the “original amount of oil or gas in place” (OOIP). The more important parameter to watch is the amount of “reserves,” which are defined as the amount of oil or gas that can be economically recovered with current technology under current economic conditions. For the Bakken, that reserve figure is less than 10% of the OOIP, or about 24 BBO. While this is a huge amount of oil, it is a much smaller number than many commentators have been talking about.

Given the lower oil prices of the late 1980s and 1990s, shales were not attractive targets because although horizontal drilling was producing longer and longer well laterals (effective “pay zones”), the frack treatments were still ineffective, limiting production but not costs. Economics suggested much higher 12

For example, the U.S. Geological Survey has estimated that the shale gas reserves in the U.S. can be reasonably expected to exceed 700 trillion cubic feet of gas (TCFG). For comparison, the total gas in storage for use this winter in the U.S. is about 3.7 TCFG.

Many people are interested in the shale resources boom in the U.S. There have been some pretty optimistic claims made in the media and by commentators about how the shale resources boom will lead to energy independence. Much misinformation has been inadvertently broadcast to the public due to widespread misunderstandings of some of the terminology used to describe how big the new resources are. To bring some perspective into this discussion, it is important to realize that people are conflating two very different concepts when they talk about the size of the new oil & gas shale finds.

time. Others actually tried to complete wells in the Bakken, but all efforts failed.

Nevertheless, this is the real number that should be evaluated when one is considering our potential for energy independence. Recent estimates on shale gas reserves are huge also, which is why some observers think low natural gas prices are here to stay.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

that even under an optimistic scenario, the U.S. will be burning 20-25 million BOPD in 2020, which is about 20 times what we will probably produce from oil shale. So with respect to oil production, we will not achieve energy independence in the foreseeable future.

It should be noted also that what matters to consumers and policy makers is not just the amount of reserves, but also the amount of daily production that can be produced from those reserves. Because shale plays have such poor reservoir characteristics (as evidenced by the need for fracking them), they produce at relatively low rates, once the first two years of “flush” production have occurred. In fact, during that first two years it is not unusual to see production declines of around 70% from the initial production level. So a 2,000 BOPD initial production from a Bakken well would normally decline to only about 600 BOPD in the third year of the well’s life. Given all this, and noting also that since the average Bakken well costs as much as $10 million, the break-even crude oil price for such a well has been estimated at $83/BO. So oil prices need to stay above that level if Bakken drilling is to continue. With regard to the impact of oil shale production on our potential energy independence, we have already seen our imports of crude oil drop from 60% of daily use to 42% of daily use. Oil production from the Bakken, the Eagle Ford, and other shale plays is rising very rapidly. Based on recent studies of shale decline curves and drilling activity, it has been estimated that oil shale production will rise to about 1.2 million BOPD by 2020. However, some analysts think it may take until 2040 to reach this level of production. Either way, the problem is

With respect to natural gas production, we have so much available that a re-tooling of several industries will likely happen. If we decide to build the infrastructure needed to turn natural gas into a new type of low cost transportation fuel, perhaps a major increase in our energy independence will occur.

Some Investing Ideas Investing in the oil and gas shale boom is risky, but there are many different ways to do it and rewards have been substantial in some cases. Whether that continues to be the case will depend in large part on the trends in oil and natural gas prices. One obvious way to invest is to buy the stocks of exploration and production companies known to be successfully developing one or more of the shale plays. Another way to invest is to buy the stocks of domestic oil field services companies known to be heavily engaged in one or more shale plays. Yet another idea is to buy the actual resources (oil and gas properties) still in the ground. One could also invest in the sand deposits used to produce fracking sand, which is used in the 1 million pounds per well range in many shale plays. Because there is a shortage of pipeline capacity, one could invest in pipeline companies known to be involved in building new pipelines to service shale plays. And since railroads have had to take up the slack for oil transportation, the stock of the bigger railroads known to be hauling oil or ordering tanker cars might also be prospective.

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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CALENDAR

Then there are the start-up companies that are trying to get natural gas transportation infrastructure built; note that this is a long term bet and very speculative. Anyway, there are a number of ways to invest in shale plays. Remember that risk to principal is involved, and that past performance is no indicator of future returns.

of events

Disclaimer This report has been prepared by Kevin M. Wilson, Ph.D. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

FEBRUARY 2013

18-20 SPE Reservoir Simulation Symposium

To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

Location: Woodlands Marriott Waterway Hotel, The Woodlands, TX, USA Organizer: Society of Petroleum Engineers (SPE)

All performance referenced is historical and is no guarantee of future results.

Phone: +1 (972) 952-9393, Email: spedal@spe.org, Web: www.spe.org/events

All indices are unmanaged and cannot be invested into directly.

ME-TECH 2013, Dubai

Investing in securities involves risk, including possible loss of principal. This report has been prepared from sources believed to be reliable but no guarantee can be made as to its accuracy or completeness. Blue Water Capital Advisors, LLC is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified custodian.

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

18-20

25-27

Location: Madinat Jumeira, Dubai, United Arab Emirates Organizer: Euro Petroleum Consultants Ltd. (EPC) Phone: +44(0) 20 7357 8394, Email: conferences@europetro.com Web: www.europetro.com

Smart Energy Summit: Engaging the Consumer Sheraton Gunter Hotel San Antonio, Texas

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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uPCOMING

AUCTIONS Leading Auctions in the Oilfield Industry. Upcoming Auctions and Auction Equipment listings from Tradequip International’s online and site-held auction companies.

Drilling Rigs

Prod. Equip.

Drilling Equip.

Tubular Goods

Oilfield Trucks

Oilfield Trailers

Parts & Tools

Support Equip.

SOUTHCENTRAL

AUCTIONS

COMPANY

DATES

LOCATION

FISHING & RENTAL TOOLS

Kruse Energy & Equipment LLC

Feb 07, 2013

Beaumont, TX USA

DRILLING & WELL SERVICE TRUCKS & TRAILERS

Kruse Energy & Equipment LLC

Mar 06, 2013 Mar 07, 2013

Odessa, TX USA

DRILLING & WELL SERVICE TRUCKS & TRAILERS

Kruse Energy & Equipment LLC

Mar 19, 2013 Mar 21, 2013

Oklahoma City, OK USA

INVENTORY

INTERNATIONAL AUCTIONS

COMPANY

DATES

LOCATION

INTERNET AUCTION

Energy Auctions Inc

Feb 19, 2013

Okotoks, AB CANADA

INVENTORY

INTERNET

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

AUCTIONS

COMPANY

DATES

LOCATION

PIPE & EQUIPMENT AUCTION

Network International Inc.

Feb 05, 2013 Feb 07, 2013

Internet

CONSTRUCTION, SHOP, VEHICLE AUCTION

Network International Inc.

Feb 06, 2013 Feb 13, 2013

Internet

PIPE & EQUIPMENT AUCTION

Network International Inc.

Feb 13, 2013 Feb 20, 2013

Internet

UNUSED CASING & TUBING

EquipmentOne

Feb 19, 2013 Feb 20, 2013

Internet

INVENTORY

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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A Brighter Day: Learning from the Truths of Life

Cares

“Reading from the Right Perspective” WORDS FROM THE PASTOR ...

W

hat started in 2005 as a 1 room temporary shack that that housed up to 13 men at one time just to keep them warm during the winter months, has now grown into a full fledge ministry of housing 6 men in the new Jesus House with a direction of helping them off the streets. They are required to seek and keep jobs, stay off drugs and alcohol, and grow a savings account, so that when they move on they will no longer be dependent on any government assistance, but totally able to sustain their own life.

Other ministries of Jesus House are the Master’s Kitchen, where over 33,000 meals are fed yearly, to our areas poor and homeless 6 days a week. During the time they come in for either breakfast or lunch, they are given from time to time help with hygiene, 1.0 assistance, prayer and exposed to some great gospel singing by a couple of great ladies. Saturdays we load up 100+ meals and distribute along with clothing, toys, and groceries to our areas women and children living in government assisted living apartments. So Jesus House is more than just a food ministry it’s a ministry that reaches out to anyone. What’s needed now is our Wo m e n / C h i l d r e n ’s / E i d e r l y Center it will house as many as the city will allow us to, which raising of the funds will

determine on how big we can build. The Center will house single women, women and children and elderly women. The Elderly women are the ones who can’t afford any other place to live because of small Social Security checks, or lack of any financial help at all. The Center will not be designed for those who can afford to stay in our areas retirement homes. The Women and Children will be enrolled into a program that will help the mom better her life to once again become selfsupportive, and neither her or her children dependent on any government assistance. Teach them to fish, not hand them a fish is our motto. The children will either be enrolled in an area school; so thjat the moms can seek out more schooling, a job or if needed given life skill classes to help them achieve a better way of life.

In conclusion, Jesus House is here to help all who are in need. We help sustain life with the passing out of blankets, sleeping bags, hot meals etc, but our main vision is to share the gospel of Jesus Christ so that all could come to know Him as their personal Lord and Savior. Remember we give them a fish they eat for a day, teach them to fish they eat for a lifetime.

If any would like to help, please go to our website for any information.

w w w . Je s us H o us e O d e s s a .c o m 18

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

by Pastor Red Molina

I

was a missionary in a faraway place, when one time I felt feverish and weak. For a couple of days, the fever would come towards the afternoon and I was feeling chills all over my body throughout the night. The fever would subside, however, at daytime. On the third day, my companions in the mission decided to bring me to the local hospital as an out-patient, where I was immediately diagnosed with malaria. I was given anti-malaria shots in the morning and I was hoping that that was it. As evening came, I felt the fever coming once again. I took the maintenance medicines prescribed to me but to no avail. The next day, I felt the medicines were not working at all. My fever reached forty degrees Celsius. I was very weak. I was throwing up what I was eating and had chills, this time, at daytime. They suggested that they give me another more powerful shot. I opted not. I asked for a second opinion from another hospital some hundred miles away. Good enough, the doctor in that hospital told me that I had typhoid, not malaria. The symptoms may have been similar, but my fever was caused by something else other than malaria. “Good you came here,” the doctor told me. “If they had given you that shot, you could have died! Share your story with us. We shall be happy to publish them. Send them to fr.redmol@yahoo.com

Wrong reading leads to wrong interventions. When we do not read the signs and the symptoms well enough, we could make fatal mistakes. I could have died that day simply because the people in the first hospital thought I had malaria. They were giving me doses upon doses of the wrong medicine. Similarly, when we “misread” things, events and people, we can make wrong decisions with terrible consequences to property, relationships and even lives, which we may never be able to correct or restore anymore. How many losses have been made due to reckless imprudence! How many bridges had been burned because of wrong judgment! We can prevent man-made disasters and relational breakdowns if only we can stop, look and listen before we leap. Reading events from the right perspective will enable us to measure our steps clearly, carefully and exactly as professionals, as students and even as parents. When hasty decisions give way to intelligent ones, we shall see how things get better, how relationships get stronger and how we can improve our lives. Then, we shall all see a brighter day…

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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State of American Energy 2013

We have a vision of our country’s future that is built on the incredible potential our industry offers to spur more economic growth and help other industries and America’s manufacturing sector recover. And with greater economic growth comes greater opportunity: for workers (including young people just starting their careers), for retirees and for the nation. 20

And energy’s foundational role in our employment picture was evident in the Labor Department’s latest jobs report: oil and natural gas extraction employment is up 6.5 percent from a year ago.

Jack N. Gerard is President and CEO of the American Petroleum Institute, the national trade association that represents all aspects of America’s oil and natural gas industry.

These jobs were created through a resurgence in our domestic resources, which can change our energy and economic future. Study after study has shown we are a resource-rich nation with vast energy assets – natural gas and oil – and we have the world’s leading refining capability to deliver the fuels and products American businesses and families need. U.S. oil and natural gas companies are investing in America’s future through the development, production and refining of oil and natural gas, and in doing so are opening up new opportunities for our economy.

Americans are looking for a new, forward-looking approach that embraces innovation, imagination, consensus, resolve and a focus on things that work.

In 2011, the U.S. ranked 159th in the world in terms of GDP growth, and lackluster economic growth attracted a lot of attention during last year’s election. Somewhat overlooked was our country’s number one ranking in natural gas production. The Wall Street Journal reported our number one ranking was at least partly to luck of geology – that we have vast resources here in the U.S. – but also to our country’s commitment to private investment, and the ability for those investors to take risk and realize a return.

Energy is fundamental to every nation’s economy. In the United States, oil and natural gas supply most of the energy we need to run our businesses, transport our goods and products, support our lives, heat our homes and move our families through their day.

With a newly-elected Congress and a president beginning his second term, we are standing on the threshold of a new year – one that presents tremendous opportunities to move forward on building our economy and creating jobs for Americans who are looking for work. The oil and natural gas industry has been a bright spot in the last few years of sluggish economic growth and listless job creation … and we are ready to do more.

USA Today recently looked at how oil and natural gas development was driving up income in rural and small town areas – where many of our operations are located. According to the article, income in “small-town America” was up 3.8 percent since 2007.

There is no question we will need more energy to meet the needs of an expanding economy and provide for a growing population in the years ahead ... and oil and natural gas will be vital to that growth, even as we expand our use of renewable energy and become more energy efficient. We need more energy of all types to meet the rising demand of a vibrant country. And we can produce more of that energy right here at home. The U.S. oil and natural gas industry is fundamental to our country’s future, through its investments in energy exploration, through its investments in infrastructure to safely and responsibly produce, refine and deliver the energy we need, through its investments in people, jobs and communities, and its investments in fuels and in innovative technologies. More domestic energy development equals economic growth, job creation, government revenue, and energy security.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

And it’s not just natural gas – the industry is producing record amounts of oil … and the refining industry is a world leader as well.

on natural gas and refined products … such as are used in plastics, medicines and even agriculture. About one-third of all the energy produced in the United States is used by manufacturers to produce and ship products that are vital to our way of life. The abundant and affordable supplies of energy from shale—natural gas AND oil – are driving job creation and economic growth across the country. And consumers are benefitting from lower energy costs brought about by the growth in natural gas production. IHS Global Insight estimates American households will save, on average, $1,000 a year between 2012 and 2015 through lower heating and electricity costs and says the savings could rise to more than $2,000 a year per household by 2035. Producing more domestic energy provides opportunities for the U.S. to increase its exports and serve new markets. A recent NERA Economic Consulting study for DOE shows exporting LNG is a net benefit in all scenarios evaluated, and that more exports increase those benefits. Just a few years ago, we were more concerned with how to import LNG to meet our own growing demand. And by developing new technologies to access potential new sources, like oil shale, we will be able to dramatically increase our energy potential and role as the global energy leader. Oil shale in the Western United States is estimated at more than 800 billion barrels, or nearly three times the proven reserves of Saudi Arabia. We’re Investing in America’s Future … and we’ll be sharing what that means through a new campaign focused on raising understanding of the unique and foundational role U.S. oil

These are the kinds of investments oil and natural gas companies are considering every day. U.S. oil and natural gas companies provide a substantial economic stimulus every year. In 2011, the industry stimulus was $545 billion dollars in capital investments, wages and dividends. Think of it: every two years, that’s a trillion dollars in economic lift without a single taxpayer dollar spent. And those investments continue each year … driving job creation and higher economic growth. This energy stimulus is providing returns across the economy: oil and natural gas industry investments directly and indirectly support more than a trillion dollars in economic activity. And a recent IHS Global Insight study said lower natural gas costs were lowering manufacturing costs, as well as heating and electricity prices by an average of 10 percent. This means lower costs for manufacturers and other sectors of our economy, and lower prices on chemicals and feed stocks based FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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and natural gas has in our economy, what it means for our communities and for Americans’ lives, for our government through production and refining, and what it means for job creation. Oil and natural gas companies currently support 9.2 million American jobs and could support an additional 1.4 million by 2030 through the industry’s investments in energy production and refining. Infrastructure investments create new construction jobs immediately, while providing job creation benefits for years to come. For the Keystone XL pipeline, that means thousands of new jobs immediately, while oil sands development could support hundreds of thousands of jobs in the next few decades. And a new analysis by IHS demonstrates the benefits of job creation from unconventional oil and natural gas development are not limited to typical oil and natural gas states. Over the past decade, more than 30 states have seen at least a 50 percent rise support industry employment. From IT to accounting to software to machines and equipment, companies and workers in every state are supporting the development of U.S. oil and natural gas. And thousands of workers in almost every state are part of a vast network of U.S. companies supporting the development of Canada’s oil sands. The U.S. refining industry supports more than 500,000 jobs, with an average income of almost $95,000, and supports nearly two percent of our GDP. In 2011, China surpassed the United States as the world’s number one manufacturer. But we can reclaim that spot, if we ensure our own energy revolution continues to gather strength. Manufacturing can and is returning to the United States: Shell, Dow, U.S. Steel and others have all announced or are considering moving manufacturing to U.S., or planning expansions here at home, for the first time in many years. These decisions are driven by the availability of reliable and affordable energy … and by the knowledge that we have a skilled and productive workforce. And the oil and natural gas industry offers tremendous employment opportunities -- to meet the changing demographics -- for African American and Latino workers. An IHS study projected that with pro-development policies 166,000 new jobs created just in the upstream sector of this industry by 2020 could be held by minority workers … and more than 285,000 by 2030. Job creation continues to be a key priority for policy makers, for our industry, and for the millions of Americans who are looking for work. With up to half of the oil and natural gas industry’s technical personnel turning over in the next 7 to 10 years, our industry provides an important opportunity to address the challenge of high unemployment. But a key part of that 22

solution is government policies that enable increased domestic energy production and maintains a strong domestic refining sector rather than discouraging it.

We were encouraged by President’s Obama’s 2012 campaign comments supporting an all-of-the-above agenda on energy, and his statements outlining support for oil and natural gas.

U.S. oil and natural gas companies are providing more than jobs, and more than economic growth. The success of this industry means enhancing our energy security, our economic security and our national security.

We need more energy of all types. Even as we dramatically expand renewable energy sources and increase energy efficiency, fossil fuels have an important role to play. Not only does natural gas have an increasingly important role in electricity generation … it provides the raw materials needed to manufacture turbine blades for windmills and solar power panels—it is essential as a backup power to intermittent electricity sources.

Millions of Americans gain retirement security through shares of oil and natural gas companies held in retirement savings, 401k’s, and pension plans. A study of the largest public employee pension plans -- covering teachers, police officers, and firefighters -- in 17 states showed oil and natural gas stocks, which on average made up less than 5 percent of the funds’ holdings, contributed as much as 15 percent to the funds’ total gains from 2005 to 2009. A similar look at colleges and universities found more good news: U.S. shares of oil and natural gas company stocks boosted the overall performance of public and private university endowments – outperforming every other asset class examined. The 11.5 percent return between 2001 and 2011 was 326 percent higher than the average annual 10-year return on all U.S. stocks. This industry is also among the largest sources of revenue to the government, providing broader financial security for the nation. As the government’s lease sale in the Gulf of Mexico in 2012 illustrates: tremendous revenues flow to government through lease sales, royalties, and bonus bids. The $1.8 billion raised through the federal offshore lease sales in 2012 could significantly increase, if the more than 80 percent of offshore areas that are currently unavailable were made available for production. Energy access – not taxes – is the key to unlocking new revenues for our government. Energy analysts at Wood Mackenzie found that more than $800 billion could be generated through 2030 through access to areas off limits and other pro-development policies. There is a new energy reality for the United States – a reality of vast domestic resources of oil and natural gas. The reality is that our energy supply is no longer limited, foreign and finite, but is now American and abundant, greatly enhancing our national security. We have a game-changing opportunity to make the U.S. the global leader in energy. If we seize the opportunity now, we will be positioned to lead for decades and realize the economic and energy security benefits of that leadership. The world will be watching, because our willingness to step up to this opportunity has geopolitical implications in Europe, the Middle East, Asia and elsewhere.

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have oil and natural gas, but because we have brought our entrepreneurial spirit to energy: to take a chance on new wells, new techniques and new technologies that provides the energy that supports our way of life. We are at the crossroads of a great turning point in our nation’s history … to realign the energy axis toward the west and into our own control. North America could become selfsufficient in liquid fuels in roughly 12 years. And as a potential energy exporter, we can help bring greater stability to the geopolitics of energy, to say nothing of the positive impacts increased U.S. supply would have for U.S. businesses, workers and consumers.

“The U.S. oil and natural gas industry is fundamental to our country’s future.”

A future of abundant domestic energy is already being made real through today’s oil and natural gas industry investments in cutting-edge technologies to access resources previously thought unreachable. With unconventional resources soon expected to produce the majority of America’s energy, we may soon be calling them very conventional.

These investments -- and benefits -- don’t occur in a vacuum. As Washington’s elected officials and opinion leaders search for common ground on tax policy, fiscal policy and regulatory regimes, we need to focus on solutions that will support our ability to provide for a secure American energy future.

Shale energy development has been a game changer for communities, the economy and even the environment, as increased use of natural gas has helped reduce CO2 emissions to 1992 levels. Since 1990, the industry has invested more than $252 billion in improving the environmental performance of its products, facilities and operations. Between 2000 and 2010, the amount of industry investments in technologies to reduce GHG emissions – $71 billion – was more than the federal government’s $43 billion and almost as much as all other industries combined. U.S. refiners have invested more than $137 billion since 1990 in technologies to produce even cleaner fuels and meet the growing variety of state and federal mandates for fuels. The complete transition to Tier 2 gasoline is estimated to have resulted in the reduction of tailpipe emissions for cars and light trucks equivalent to taking 164 million cars off the road. And through increased efficiency, we are doing more with less: America uses about half as much energy today to produce a dollar of GDP than it did in 1970. America’s oil and natural gas industry has a unique and foundational role in our country: providing the fuels that power our economy, creating jobs, and supporting our national interests -- through the industry’s investments in America’s future. This is a uniquely American movement: private investment in domestic oil and natural gas – and the technologies to access these reserves – has brought us to a turning point that is unmatched anywhere in the world. Not because they don’t

There is room for agreement. We welcomed President Obama’s campaign promises to support oil and natural gas development as part of an all-of-the-above strategy. We can offer solutions to some of the pressing issues that will impact our economic future: tax reform, infrastructure improvements, leasing and permitting on federal lands, regulations that don’t add unnecessary layers of compliance burdens on top of existing protections, and ensuring regulations won’t compromise our ability to grow the economy and create jobs through domestic energy. And there is plenty of work to be done: our economy has struggled to recover; millions of Americans are out of work and millions more have stopped looking for work altogether; geopolitical turmoil resists easy diplomatic answers; and many Americans wonder if Washington can work in a bipartisan manner to solve the most pressing issues before us. I think we can work together … I think we must, if we are to ensure domestic energy is available to provide the foundation for revitalizing our economy. Thanks to vast U.S. energy resources, the oil and natural gas industry stands ready to continue the investments made in jobs, communities, technology, the environment and safety, while improving America’s energy security.

We are investing in America’s future. Thank you. Jack N. Gerard

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ENERGIZED

Marketing Tips

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# 1

SAN ANTONIO STOCK SHOW AND RODEO

Founded in 1950, the San Antonio Stock Show and Rodeo is one of the largest events of its kind in the United States. A huge stock show, live professional rodeo and great entertainment combine to make this one of the best entertainment bargains around. This year’s SA Rodeo will be Feb. 7-24.

# 2

EAGLE FESTIVAL

With eagle spotting tours and special birding tours on Lake Fork and Lake Tawakoni, the Emory Eagle Festival has been an annual event for over a decade. The Eagle Festival is held the second weekend in February each year.

# 5

CHARRO DAYS

Staged each February since 1938, Brownsville’s Charro Days is a weeklong, traditional Mexican “pachanga,” with parades, dances and a variety of fun events for the entire family. The 2013 edition is set to begin Feb. 24-March 3. 26

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FEBRUARY

FESTIVALS AND EVENTS IN TEXAS

ROAD TRI P

February may seem to some to be a dreary month. It is, after all, the last full month of winter. However, all across Texas, a variety of festivals, events and attractions will help visitors forget the winter blues.

# 3

GALVESTON MARDI GRAS

Set to kick off Feb. 1-12, Galveston’s 2013 Mardi Gras is a 12 day, 11 night party prior to lent. Not as famous as Mardi Gras celebrations in New Orleans or Mobile, the Galveston event is nonetheless packed with tradition and, more importantly, packed with fun.

# 4

LIVESTRONG AUSTIN MARATHON

Held in the Capitol City, the Livestrong Austin Marathon is one of the most scenic races in Texas, with nearly half the course being run along Town Lake & the Colorado River. The rolling hills of Austin also make this one of the more challenging races offered in the Lone Star State. This year’s race will be Feb. 15-17.

# 6

COWTOWN MARATHON

Ft. Worth’s annual Cowtown Marathon is actually six events in one: USA T&F certified marathon and half-marathon, three-person relay marathon, USA T&F certified 10k and 5k for adults, and a USA T&F certified 5k for kids. This year’s race is scheduled for Feb. 22-24.

# 7

DALLAS BOAT SHOW

The Dallas Boat Show kicks off the first weekend of February. Running from Feb. 1-3 and 7-10, the Dallas Boat Show features an impressive display of boats, accessories, personal watercraft and fishing tackle, as well as informative seminars.

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The Solar Energy Outlook

“... we expect solar module cost to decline and efficiency to increase ...”

for 2013

watt module and a 65 cent a watt module is just not that big of a deal anymore for system costs,” Shah said. “People are now looking at non price features for making decision on who to buy from.”

Salt Lake City, UT - With 2013 poised to pounce, now’s the time for all forward thinking solar proponents to peer into that proverbial crystal ball to see what the new year holds in store. What will 2013 look like for global solar initiatives? How will this impact the creation of jobs? Here’s what some of the experts have to say about the outlook for the coming year.

Little Impact Predicted from U.S. / Chinese Solar Cell Tariffs The recently published U.S. Solar Market Insight Report, which was released by the Solar Energy Industries Association (SEIA) and GTM Research, states that the impact of tariffs imposed against Chinese solar manufacturer providers will be minimal, as they only apply to panels using Chinese manufactured solar cells – something that can be easily circumvented. According to Shah, Chinese solar manufacturers will be virtually unaffected by the tariffs because of a pre-existing diversity in their solar product lines. “Today, the Chinese already diversify by using Taiwanese cells,” Shah explained, “so they’re just sending those Taiwanese cell modules to the U.S. instead.” The SEIA report claims that “tariffs will not have a material impact on pricing in the U.S.” and goes on to explain that Taiwanese-obtained solar cells will come with a cost impact of less than $0.10 per watt.

Low Cost Solar PV Will Lead to Increased Development and More Jobs As a result of the oversupply of solar PV panels in 2011 and 2012, costs were driven down significantly. This spelled bad news for solar PV manufacturers seeking to make decent returns or any returns at all, but led to increased opportunities for downstream providers to pursue large-scale solar developments, both within the major global markets and 30

Consolidation and Specialization Will Emerge in 2013 also developing countries that previously weren’t able to afford it. Jigar Shah, partner at Inerjys Ventures, says this will continue and predicts “robust” global job growth in the solar industry in 2013. “The volumes are going to go up substantially next year,” Shah said. “The pricing signals that were provided this year were so low, that there’s at least 40 or 50 countries in the world who haven’t done a lot of solar who are earnestly looking at awarding contracts in the first quarter of next year and having construction completed by the end of 2013. You’re starting to see

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an extraordinary proliferation of solar based on the pricing that was indicated by manufacturers in 2012.”

but added, “we believe consolidation among manufacturers will lead to fewer management and administrative jobs globally.”

Nat Kreamer, CEO of Clean Power Finance, agrees: “Just as over-investment in fiber optics led to inexpensive bandwidth, creating the foundation for the Internet economy we enjoy today, inexpensive solar modules are creating the foundation for explosive growth of the solar industry.”

With respect to the plummeting cost of solar panels, Kreamer says he doesn’t expect prices to continue to drop in 2013 as rapidly as they did in the last two years. “Over the long-term,” Kreamer said, “like other semi-conductor industries, we expect solar module cost to decline and efficiency to increase. Since modules today account for less than 20 percent of a solar system’s cost, solar generation competitiveness gains are likely to come from other parts of the cost structure, such as customer acquisition and permitting.”

Kreamer also said he anticipates more job growth in the U.S. downstream solar industry as the sector continues to grow,

Shah adds that most developers today are “not looking for price reductions,” citing significantly lowered costs as the primary reason. “The difference between getting a 70 cent a

Although the industry has already begun to show signs of consolidation by way of numerous bankruptcies and the absorption of assets by larger solar companies, Kreamer sees this as a trend that’s likely to increase into 2013. He also predicts fewer all-in-one corporations and a more widespread distribution of supply chain services. “We expect module manufacturers to consolidate to achieve economies of scale,” Kreamer said, “and downstream companies – which sell, install and finance solar – to create comparative advantage by focusing on what they do best. For example, companies like Paramount Energy are outstanding at acquiring consumers and work with best-in-class contract installation companies, using financing provided by specialty financing companies, on Clean Power Finance’s online marketplace.”

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Saudi Arabia Makes Inroads to Solar Dominance According to Marc Norman, lawyer for Chadbourne & Park LLP and director of the Emirates Solar Industry Association (ESIA), the official launch of Saudi Arabia’s plan to procure 54,000 MW of renewable energy capacity by 2030 is due to take place in the second quarter of 2013. The first step will be an introductory procurement round for up to 600 MW of solar power facilities and 100 MW of wind power. “This initial procurement program is poised to be officially launched in Q2 of 2013,” Norman said. “There will be six solar projects and one wind project, located in seven different prepackaged sites. Each facility is set to have a capacity of approximately 100 MW. The request for proposals are due to be issued in the second quarter of 2013.” The announcement of Saudi Arabia’s renewables procurement program came as a surprising move. The program is being deployed in response to projections that continued use of Saudi Arabia’s own oil resources could make the country a net oil importer by 2030. It is also seen as a means to combat the country’s high unemployment rate, which has hovered at over 10 percent for the last few years.

“The Saudis see this as an opportunity to create a center for excellence for solar energy globally,” Norman said, “and as a means to stimulate employment in the Kingdom. This is going to be a massive game changer for the global renewables industry, and particularly solar power. This is one of the biggest global developments of 2012, and it will be on the radar of every industry player in 2013.” Emerging Markets Will Bring Global Solar Industry Stability The recently released IHS Solar Emerging Markets Study predicts that emerging markets in Asia Pacific, Latin America, the Middle-East, Africa and “emerging Europe” will help strengthen the solar industry, beginning in 2013. The report indicates that up to 30 GW of PV capacity will be added throughout various emerging markets in the next four years, helping to stabilize an industry that’s steeling itself against the elimination of critical incentives in several European markets. It says that 2.1 to 3.5 GW of new PV capacity will be added in 2013 alone. The report identified South Africa, Thailand, Chile, Romania and Brazil and five of the “most appealing” emerging markets for solar development. The next most appealing markets, according to the report, were Argentina, Ecuador, Turkey and Mexico.

Will 2013 Shape Up to Be a Watershed Year? Possibly the most sobering prediction for 2013 comes from Norman, who views the aforementioned steps being taken by Saudi Arabia as a sign that the global solar pendulum may be moving in a new direction.

“At the moment,” Norman says, “the U.S. and the E.U. are going through difficult times. Renewable energy is still more or less a luxury, and a quite expensive one. But if you look at what’s happening in the U.S. with the revolution in shale oil and shale gas, you may see the development of renewable energy adversely affected. Ultimately, you’ve got something there that’s readymade, that’s cheaper, and that may be a massive opportunity for the U.S.” Citing a rising tide of interest in renewable energy in the Middle East and economic worries in the U.S. and throughout Europe, Norman says, “They’re like opposing worlds. One side is slowing down, and the other side is gearing up – rising.”

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FOCUS:

UNCONVENTIONAL Oil & GAS:

Industry optimistic on Cline Shale liquids potential. by Paula Dittrick US independents, particularly Devon Energy Corp. and Apache Corp. , are examining the potential of the Cline shale oil play in the Midland basin.

O

perators drilling the Wolfcamp and Wolfberry trends see the Cline as offering another pay zone among numerous formations in the Permian basin. The Pennsylvanian-aged Cline shale underlies the Permian-aged Wolfcamp shale.

in the center of the play (see map). The Cline reservoir is believed to be 200-550 ft thick.

The Cline yields 40-45° gravity crude. The namesake formation of the emerging unconventional play is 9,250 ft below the surface of 10 West Texas counties with Mitchell County being

Meanwhile, government leaders in various West Texas counties are trying to prepare for a potential oil boom. Mitchell County economic development officers visited the Eagle Ford shale play area in South Texas to discuss the logistics and needs, such as hotels and restaurants, to support a growing industry presence.

Devon, Apache, and others are optimistic about the formation’s potential.

Water supply and other logistics were discussed during a recent meeting in Snyder, which is in Scurry County. Another Cline shale meeting is scheduled for Feb. 8 in Colorado City, which is in Mitchell County. The Sweetwater Enterprise for Economic Development in Nolan County also is participating in regional meetings about the Cline shale. Centurion Pipeline LP, a subsidiary of Occidental Petroleum Corp., said it plans to reactivate and expand its existing pipeline system in the Cline shale. The crude oil pipeline will have the capacity to transport as much as 75,000 b/d and can be expanded. It’s scheduled to be brought into service in multiple phases starting in the second quarter. 34

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The Cline shale pipeline system will transport crude oil from the Texas counties of Irion, Tom Green, Sterling, Coke, and Mitchell to Centurion’s terminal in Colorado City. From Colorado City, shippers could transport oil to Cushing, Okla., via the Centurion Pipeline and to Gulf Coast refiners via the BridgeTex Pipeline, expected to be in service in July 2014.

Operators explore Cline Devon Pres. John Richels told analysts that Devon’s expected type curve value is 570,000 boe for a Cline well with 85% being oil and natural gas liquids. Devon suggests the 9,800-sq-mile Cline

formation contains 3.6 million bbl/sq mile. The Oklahoma City independent holds 500,000 net acres.

for a 30% interest with $980 million of the total to be a drilling carry financing 70% of Devon’s expenses.

In September, Devon closed a joint venture agreement with Sumitomo Corp. of Japan covering 500,000 acres in the Cline and 150,000 acres in the Wolfcamp (OGJ Online, Aug. 2, 2012).

The biggest acreage holder in the Cline is Apache with 520,000 net acres. Last year, Apache drilled six wells there.

Apache Corp. has identified more than 34,000 drilling locations in the Permian basin, including 2,321 horizontals in the Cline shale. A Permian basin oil well with a sucker rod pump is connected to a tank battery (not pictured). Photo from Apache Sumitomo agreed to invest $1.4 billion

John J. Christmann, Apache vice-president, Permian region, told a Bank of America Merrill Lynch energy conference in November 2012 that Apache believes the Lower Cline has an average thickness of 350 ft gross with net-to-gross shale pay of 40%. Porosity averages 7%, total organic carbon averages 3%, and original oil in place is 23.4 million boe/section. Apache has identified 2,321 Cline drilling locations, of which 3% are proved undeveloped.

and planned to test laterals of more than 7,000 ft. Its activities are in Glasscock, Howard, Reagan, and Sterling counties. Exploration and drilling efforts in the southern half of its acreage have been centered on the Spraberry, Dean, and Wolfcamp formations while the emphases in the northern half been on deeper intervals, including the Wolfcamp, Cline shale, Strawn, and Atoka formations.

as in the Eagle Ford and Bakken shale formations,” Laredo said. “We have acquired 3D seismic data to assist in fracture analysis and the definition of the structural component within the Cline shale.” Laredo has multiple targets in the vertical Wolfberry along with horizontal targets in the Wolfcamp and Cline shales. For the Cline, it reports an average thickness of 200-350 ft with 2-7.5% TOC, thermal maturity of 0.85-1.1% RSO, total porosity of 3-12%, and pressure gradient of 0.55-0.65 psi/ft. Laredo estimates OOIP of 25-40 million boe/ section for its Cline holdings.

“We have expanded our The biggest acreage holder drilling program to include a horizontal component in the Cline is Apache with targeting the Cline and Wolfcamp shales,” Laredo 520,000 net acres. said on its web site. The independent has an extensive technical review including coring and testing the Cline Energen Corp. of Birmingham plans to spend $465 million in separately in multiple vertical wells. the Midland basin during 2013 of which $420 million will be spent in the Wolfberry and $65 million in the Wolfcamp-Cline. “We believe the Cline shale exhibits similar petrophysical Energen plans to run one rig in the Wolfcamp-Cline, drilling attributes and favorable economics compared to other six wells this year. liquids-rich shale plays operated by other companies, such

Christmann said it costs Apache $7.6 million on average to drill and complete a Cline well based on a 6,800-ft lateral and 15 hydraulic fracturing stages. The anticipated rate of return is 28%. The EUR is 423,000 boe, of which 87% is liquids. The Barracuda 45-2H well spudded in June 2012 had a peak initial potential rate of 810 boe/d with a 30-day average of 623 boe/d. Barracuda 45-2, deemed Apache’s best Cline well so far, had a 3,800-ft lateral and was completed using 11 hydraulic fracturing stages.

Multiple shale targets The Permian basin offers multiple shales that are going to be productive horizontally, Christmann said. “We’ve got the ability to stack shales later,” he said of horizontal targets in the Lower Wolfcamp and Atoka-Barnett shales. Laredo Petroleum of Tulsa has completed 33 gross horizontal wells in the Cline, 36

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PBE NEWS BRIEFS Watching the basin

LEGISLATORS FOCUS ON BUDGET, BASIN ISSUES. The biggest issue each Texas legislative session is always balancing the budget, Sen. Kel Seliger and Rep. Tryon Lewis said, and along with that in the 83rd Legislative Session, there are certain issues they’re focusing on.

Lewis also said he hopes to change legislation regarding tuition exemptions for families of veterans. “The problem is the state is not incurring that cost,” Lewis said. “The individual universities and colleges are incurring those costs.”

Seliger, as a member of the education board, said one of his priorities is budgetary issues in education, as well as focusing on the role of Medicaid.

Aside from those issues, Lewis also said legislators are lobbying to take some money from the Rainy Day Fund and put it toward the repair of highways and damaged roads.

“Everybody has their own priorities for the budget and how it ought to be divided up,” Seliger said. Lewis agreed that the budget is one of the biggest issues in the legislature each session. Because of increased revenues, both Seliger and Lewis said the congressmen and congresswomen would be dealing with more money divided up, which may make the process easier. Lewis said besides the budget and education finance and funding issues, he has a few bills and issues he hopes to weigh in on during the session.

Lewis said because much of the money in that fund comes from oil and gas money, he wants to bring some to help the roads affected by that industry. “If it’s proposed to take money out of the Economic Stabilization Fund for highways, then I think specifically the areas that are impacted by the oil and gas boom get funding to repair the damage to the roads,” he said. And both men also believe in the wake of the Newtown, Conn., school shooting that guns will

be a discussion in the legislature, although they do not agree how it will happen. “I think if there is a debate, it will be centered around guns,” Seliger said. “But it’s a discussion that ought to include things about mental health issues and school security as well. It’s a much broader issue than just the availability of guns in schools.” Seliger said he also is eager to

listen to input from school administrators and superintendents. But Lewis said he doesn’t think some gun issues can be legislated against. “I think that the administrators of local school districts, that whether guns are allowed and under what circumstances and who can do it, I think that we ought to give them flexibility to do it,” Lewis said. “One thing the legislature should do is back off from chasing headlines. In a free society, you can’t cure all ills.”

Watching the STATE

DOUBLE DIPPING BY ELECTED OFFICIALS TARGETED BY TEXAS STATE REP. CHRIS TURNER Opening week of a new session of the Texas Legislature, vacant as it is of much substance, is the perfect time to send up flares for bills lawmakers hope won’t be talked about come May. Take House Bill 413, a rather short and direct piece of lawmaking that would prohibit elected officials eligible for a state pension to collect it while drawing a state salary. Those officials would not include Gov. Rick Perry and several others whose identities and pensions are kept confidential by a law passed by the legislative bodies to which they belong. Late in 2011, at the time he was required by federal law to declare he was collecting a pension of more than $90,000 in addition to his

$150,000 a year governor’s salary, Perry told the Texas Tribune, “I think you would be rather foolish to not access what you’ve earned.” Having been stung by the governor’s disclosure, state Rep. Chris Turner, D-Grand Prairie, filed a corrective in HB 413, the Tribune reports today. The bill, however, is carefully written so as not to cut off the governor or any of the anonymous elected officials currently - how shall we put this - double dipping. “I just couldn’t believe it, and I think most Texans can’t believe elected officials can collect a salary, retire and still stay on the job and collect a pension all at the same time,” Turner told the Tribune. Given current law, the public will never know how many elected

officials might be stopped by HB 413, assuming the Legislature has the will to deny itself the pensions a past Legislature once determined it had so justly earned. Such an unusual display of courage might serve as an example to Congress where a dozen or so Texas representatives are drawing federal pensions on top of their salaries. Or the more than 6,200 state employees who draw salaries and pensions, 189 of them, including Perry, do so while earning annual salaries of $100,000 or more. Not to mention the nearly 200 employees of the Fort Worth Independent School District and who knows how many other employees in how many other school districts across Texas.

(From wire services reports)

One of those includes funding for a classroom and office building for the Texas Tech Health Sciences Center. The building, which would cost $18 million to build, is one of Lewis’ top priorities, he said.

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Watching the Nation

Watching the GOVERNMENT

GASOLINE PRICES PREDICTED TO FALL IN 2013 NEW YORK (AP) - At least gasoline should cost you less in 2013. Hamburger, health care and taxes are all set to take a bigger bite out of the family budget this year. But drivers’ annual gas bills are expected to drop for the first time in four years. Forecasters say ample oil supplies and weak U.S. demand will keep a lid on prices. The lows will be lower and the highs won’t be so high compared with a year ago. The average price of a gallon of gasoline will fall 5 percent to $3.44, according to the Energy Department. “Everything is lining up to lead to softer prices this year,” said Tom Kloza, chief oil analyst at the Oil Price Information Service.

That would still be the third-highest average price ever. But a discount of 19 cents per gallon from 2012 would save the typical household $205 this year and free up $25 billion that could go instead to restaurants, malls or movie theaters - the kind of consumer spending that accounts for 70 percent of American economic activity. “It’s a little benefit to the economy, and it’s a little more reason the Fed doesn’t have to worry about inflation,” said James Hamilton, an economist at the University of California at San Diego who studies energy prices.

Watching the WORLD

CHINA TRADE REPORT SENDS METALS, OIL HIGHER By The Associated Press Prices for gold and other metals are jumping, propelled by an encouraging report about China’s trade growth. Contracts for gold and copper rose 1 percent or more. Contracts for silver, palladium and platinum rose 2 percent or more. Energy commodities also closed higher, with oil and wholesale gasoline adding value. Prices rose amid signs that the global economy could be improving. China’s exports and imports rose. 42

And Mario Draghi, head of the European Central Bank, said the struggling euro area should start growing again later this year. Agricultural prices were less decisive. Wheat was essentially flat, corn rose and soybeans fell. Late winter snows have made some traders concerned about the possibility of a second straight dry season.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

BIDEN, NRA CLASH OVER NEW GUN CONTROL PROPOSALS WASHINGTON (AP) - Despite fresh opposition from the National Rifle Association, the Obama administration is assembling proposals to curb gun violence that would include a ban on sales of assault weapons, limits on high-capacity ammunition magazines and universal background checks for gun buyers.

Sketching out details of the plan Thursday, Vice President Joe Biden said he would give President Barack Obama a set of recommendations by next Tuesday. The NRA, one of the pro-gun groups that met with Biden

during the day, rejected the effort to limit ammunition and dug in on its opposition to an assault weapons ban, which Obama has previously said he will propose to Congress.

Watching Offshore

TRANSOCEAN TO PAY $1.4B FOR SPILL TRANSOCEAN’S TAB: The Justice Department reached a $1.4 billion settlement with Transocean Ltd., the owner of the drilling rig that sank after an explosion killed 11 workers and created the massive 2010 oil spill in the Gulf of Mexico. BP AGREED: BP PLC, which leased the rig from Transocean, already has agreed to pay a record $4.5 billion in penalties and plead guilty to manslaughter and other criminal charges related to the spill. INTO THE POOL: Transocean previously said it had reserved $2 billion to pay claims related to the Deepwater Horizon disaster. © 2013 The Associated Press. All rights reserved.

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

43


IMPACT OF THE BOOM 7 #

(gained 3 spots)

State College, PA

(gained 14 spots)

8

#

Midland, TX

TOP 10 BEST-PERFORMING SMALL CITIES

20TH 50TH 21ST 21ST SHORT-TERM JOB GROWTH (5/2011-5/2012) 55TH Six of the small cities in last year’s Top 10 stayed there in the latest rankings. Logan, Utah, claimed frst place again, HIGH-TECH GDP GROWTH (2006-11) followed by Morgantown, W.Va., which moved up from third last year. Texas held four of the Top 10 slots: Odessa, 25TH Longview, Midland, and Tyler, too. HIGH-TECH GDP GROWTH (2010-11) 105TH HIGH-TECH GDP CONCENTRATION 11TH NUMBER OF HIGH-TECH INDUSTRIES (LQ>1) 4TH JOB GROWTH (2006-11)

In addition to ranking the 200 largest U.S. metro areas, the Best-Performing Cities project includes a companion JOB GROWTH (2010-11) index that measures the performance of smaller cities. The 2012 index looks at 179 small metros, the same number as in 2011. The highest-ranked this year have either high concentrations of public-sector employees (especially in WAGE GROWTH (2005-10) prominent universities) or are expanding their activities in the energy sector. These locales were largely immune to WAGEaGROWTH the nationwide collapse of housing markets because they did not experience bubble (2009-10) in the frst place.

Top 10 Best - Performing Small Cities Metropolitan Statistical Area (MSA) Logan, UT-ID Morgantown, WV

2012 Rank

1 2

2011 Rank

1

3

Odessa, TX

4

34

Fargo, ND-MN

5

7

Longview, TX

6

9

State College, PA

7

10

Midland, TX

8

22

Tyler, TX

9

20

Columbia, MO

10

25

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

WAGE GROWTH (2009-10) SHORT-TERM JOB GROWTH (5/2011-5/2012) HIGH-TECH GDP GROWTH (2006-11) HIGH-TECH GDP GROWTH (2010-11) HIGH-TECH GDP CONCENTRATION NUMBER OF HIGH-TECH INDUSTRIES (LQ>1)

» Penn State University brings stability to local economy. » Gas pipeline expansion created construction jobs.

» Administrative center of Permian Basin energy industry. » Wages grew 10.6 percentage points more than the U.S.

LIABILITIES: » State funding cuts limit PSU’s ability to expand jobs

and enrollment as well as support commercialization of innovation.

average, the fastest rate among small metros.

» Hot housing market.

LIABILITIES: » Lack of industrial diversification increased risk and exposed local economy to fluctuating oil prices.

fueled by improved five-year job and wage growth. The presence of Penn State University gives the local economy a shot in the arm. The spending of its almost 15,000 employees,70 45,300-plus students,71 and thousands of visitors bolstered business sales volume, including the leisure and hospitality sectors. And Penn State’s research and development activities, in effect, incubate high-tech companies, fostering the metro’s specialized know-how in software publishing, technology manufacturing, satellite communications, and so on. Healthcare also played a critical role, adding 855 positions from 2006 to 2011. Meanwhile, the number of natural gas wells drilled increased from nine in early 2010 to 55 in February 2011, with 77 additional wells permitted in 2011.72 Booming pipeline construction generated hundreds of jobs, energizing the metro’s growth.

Source: Milken Institute.

44

WAGE GROWTH (2005-10)

ASSETS:

3 2

JOB GROWTH (2010-11)

1ST 2ND 1ST 1ST 53RD 150TH 51ST 127TH 37TH

ASSETS:

STATE COLLEGE, PA., climbed to seventh in this year’s index,

Bismarck, ND

JOB GROWTH (2006-11)

34

BEST-PERFORMING CITIES

» Tight labor market. MIDLAND, TEXAS, climbed 14 spots this year from 22nd to

eighth. It topped long-term employment gains and fiveand one-year wage growth, ranking second in short-term employment growth after its neighboring metro, Odessa. With about 20 miles between them, Midland and Odessa comprise one statistical area and share many economic traits, including heavy dependence on the petroleum industry, burgeoning construction, increasing population, and remarkable GDP growth. Although Midland showed strength in industries outside oil and gas, such as construction, professional and business services, and wholesale trade, energy remains its lifeblood. In 2011, the sector accounted for 49 percent of local GDP and directly provided 15.5 percent of jobs.73 However, what makes Midland unique is its role as administrative and management center for the oil and gas industry in the Permian Basin, essentially serving as headquarters for the exploration and services companies active in the region’s petroleum fields.74 As a result, management and business occupations make up a relatively large share of Midland’s workforce and raised the metro’s incomes at a faster pace than the Texas average. In 2011, the median household income in Midland was $54,330, well beyond the state’s $49,392.75 FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

45


BY THE NUM83RS

January 25, 2013

Each month we track the activity of all the drillers and compile the results into a report that identifies the top

U.S. RIG COUNT - TEXAS States & Districts Texas RRC District 1

BAKER HUGHES RIG COUNT

Top 35 Drillers Rankings 35

out of 100 drillers based on their footage drilled. Updated monthly, these reports also detail the number of well starts and the number of directional wells drilled by each of the top

RIGDATA RIG COUNT

Company

Footage Drilled

% of Total

Average Footage

Well Starts

% of Total

Directional Wells

1

Helmerich & Payne, Inc.

42,151,342

13.5%

9,920

4,249

10.7%

3,757

2

Patterson-UTI Drilling Company, LLC

33,711,433

10.8%

9,814

3,435

8.7%

2,684

3

Nabors Industries, Ltd.

27,722,907

8.9%

8,444

3,283

8.3%

2,881

4

Ensign Energy Services, Inc.

13,593,019

4.4%

6,599

2,060

5.2%

1,240

5

Precision Drilling Trust

12,483,243

4.0%

9,677

1,290

3.3%

1,113

6

Nomac Drilling, LLC

11,735,776

3.8%

8,844

1,327

3.4%

1,326

7

Unit Drilling Company

9,439,725

3.0%

10,139

931

2.4%

900

8

Trinidad Drilling, Ltd.

8,401,006

2.7%

10,953

767

1.9%

679

RANK

Four Week Average 2012

Four Week Average 2013

Last Week

This Week

Four Week Average 2012

Four Week Average 2012

Last Week

This Week

Waiting to Spud

127

140

137

141

126

136

138

140

17

Texas RRC District 2

83

84

88

86

81

86

85

88

10

Texas RRC District 3

38

33

34

33

39

37

36

34

2

35 out of 100.

9

Pioneer Energy Services Corp.

7,556,582

2.4%

9,738

776

2.0%

413

10

Capstar Drilling, LP

6,884,342

2.2%

6,281

1,096

2.8%

135

11

Cactus Drilling Company, LLC

5,935,168

1.9%

10,358

573

1.4%

538

12

Union Drilling, Inc.

5,553,729

1.8%

8,240

674

1.7%

456

13

Savanna Energy Services Corp.

5,275,490

1.7%

9,916

532

1.3%

191

14

Lariat Services, Inc.

4,163,358

1.3%

6,609

630

1.6%

286

15

Desoto Drilling, Inc.

3,990,956

1.3%

4,338

920

2.3%

909

16

Xtreme Drilling and Coil Services Corp.

3,855,121

1.2%

8,586

449

1.1%

423

17

Complete Production Services, Inc.

3,808,706

1.2%

11,104

343

0.9%

128

18

Big Dog Drilling Company

3,558,729

1.1%

11,745

303

0.8%

7

19

Sendero Drilling Company, LLC

3,229,574

1.0%

11,534

280

0.7%

0

20

Cyclone Drilling, Inc.

2,817,495

0.9%

7,395

381

1.0%

359

21

Latshaw Drilling & Exploration Company

2,704,267

0.9%

9,261

292

0.7%

239

22

Robinson Drilling of Texas, Ltd.

2,585,696

0.8%

11,242

230

0.6%

3

23

CanElson Drilling, Inc.

2,508,570

0.8%

10,115

248

0.6%

28

24

Orion Drilling Company, LLC

2,463,632

0.8%

11,512

214

0.5%

208

25

Scandrill, Inc.

2,456,932

0.8%

12,285

200

0.5%

140

26

SST Energy Corporation

2,335,639

0.8%

9,018

259

0.7%

232

27

Basic Energy Services, Inc.

2,045,022

0.7%

7,176

285

0.7%

29

28

Ringo Drilling I, LP

1,900,275

0.6%

7,481

254

0.6%

7

29

Lewis Petro Properties, Inc.

1,781,500

0.6%

13,704

130

0.3%

129

30

Silver Oak Drilling, LLC

1,738,904

0.6%

6,662

261

0.7%

98

31

Academy Drilling, LLC

1,678,175

0.5%

11,494

146

0.4%

0

32

Aztec Well Servicing Co.

1,637,328

0.5%

6,396

256

0.6%

96

COPYRIGHT Š 2013 RIGDATA P.O. Box 820547 Fort Worth Texas 76182-0547 1-800-627-9785 | www.rigdata.com

33

J.B. Hunt Gas & Oil Drilling, LLC

1,522,600

0.5%

11,712

130

0.3%

0

This report is protected under United States and international copyright laws and is intended for the exclusive use of the subscriber. Any unauthorized reproduction, retransmission, distribution, publication, broadcast or circulation of this report to anyone, directly or indirectly, without the express prior written consent of RIGDATA is prohibited.

34

Saxon Energy Services, Inc.

1,461,020

0.5%

6,859

213

0.5%

200

35

Murfin Drilling Company, Inc.

1,449,770

0.5%

4,785

303

0.8%

0

Total Top 100 for year 2012

311,330,906

100.0%

---

39,539

---

100.0%

Texas RRC District 4

53

30

28

27

55

29

27

32

4

Texas RRC District 5

52

20

21

18

49

18

20

15

4

Texas RRC District 6

55

31

31

31

57

29

26

30

1

Texas RRC District 7B

14

19

18

12

23

19

15

20

2

Texas RRC District 7C

75

70

69

71

73

69

69

66

2

Texas RRC District 8

282

272

266

275

279

250

247

252

10

Texas RRC District 8A

41

38

35

39

38

37

39

42

1

Texas RRC District 9

29

21

20

23

42

39

37

7

Texas RRC District 10

73

63

65

63

77

68

68

67

3

Texas Total

922

821

812

819

939

814

809

823

63

U.S. Totals

2,008

1,760

2,179

1,871

1,762

1,892

110

1,749 1,753

36

To order additional report copies at a reduced rate or for a corporate site license, please contact: 1-800-627-9785 46

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

47


Top 35 Operators Rankings Updated every month, we track and rank the top

This Week In Petroleum After Late-2012 Declines, Gasoline Prices Stabilize in Early 2013

35 out of 100 operators based on their footage drilled.

Keep track of the most active operators with details on their number of well starts. Company

Footage Drilled

% of Total

Average Footage

Well Starts

% of Total

Directional Wells

1

Chesapeake Energy Corporation

17,818,335

5.7%

9,679

1,841

4.7%

1,791

2

Anadarko Petroleum Corporation

15,873,701

5.1%

9,528

1,666

4.2%

1,590

3

Pioneer Natural Resources Company

11,497,203

3.7%

12,760

901

2.3%

284

4

EOG Resources, Inc.

10,950,009

3.5%

9,973

1,098

2.8%

1,059

5

Occidental Petroleum Corporation

9,203,673

3.0%

6,004

1,533

3.9%

772

6

Apache Corporation

8,466,725

2.7%

9,036

937

2.4%

297

7

ExxonMobil Corporation

8,250,829

2.7%

8,759

942

2.4%

703

8

Devon Energy Corporation

8,218,770

2.6%

9,601

856

2.2%

759

9

BHP Billiton

6,977,278

2.2%

11,217

622

1.6%

621

10

QEP Resources, Inc.

6,828,145

2.2%

12,128

563

1.4%

541

11

Encana Corporation

5,971,556

1.9%

10,260

582

1.5%

562

12

Concho Resources, Inc.

5,667,847

1.8%

9,127

621

1.6%

178

13

Shell Exploration & Production Co., Inc

5,428,162

1.7%

12,089

449

1.1%

440

14

ConocoPhillips Company

5,176,766

1.7%

9,261

559

1.4%

432

15

Marathon Oil Corporation

5,014,457

1.6%

13,058

384

1.0%

383

16

SandRidge Energy, Inc.

4,436,196

1.4%

5,397

822

2.1%

429

17

Chevron Corporation

4,340,790

1.4%

4,818

901

2.3%

314

18

Southwestern Energy Company

4,299,949

1.4%

4,465

963

2.4%

954

19

Noble Energy, Inc.

3,878,065

1.2%

9,278

418

1.1%

368

20

Whiting Petroleum Corporation

3,350,916

1.1%

8,614

389

1.0%

262

21

Continental Resources, Inc.

3,311,991

1.1%

6,691

495

1.3%

480

22

Energen Resources Corporation

3,132,149

1.0%

8,898

352

0.9%

48

23

Newfield Exploration Company

2,400,885

0.8%

7,410

324

0.8%

293

24

Range Resources Corporation

2,348,876

0.8%

6,750

348

0.9%

343

25

SM Energy Company

2,299,822

0.7%

9,870

233

0.6%

223

26

Murphy Oil Corporation

2,214,210

0.7%

9,885

224

0.6%

224

27

WPX Energy, Inc.

2,162,970

0.7%

7,332

295

0.7%

290

28

CrownQuest Operating, LLC

2,137,500

0.7%

11,941

179

0.5%

0

29

Endeavor Energy Resources, LP

2,126,059

0.7%

11,877

179

0.5%

6

30

Linn Energy, LLC

2,104,877

0.7%

10,850

194

0.5%

72

31

Lewis Energy Group, LP

1,958,500

0.6%

13,792

142

0.4%

140

32

Cimarex Energy Co.

1,953,404

0.6%

10,335

189

0.5%

161

33

Carrizo Oil & Gas, Inc.

1,920,043

0.6%

9,143

210

0.5%

193

34

Bill Barrett Corporation

1,893,531

0.6%

8,726

217

0.5%

197

35

BP America Production Company

1,883,832

0.6%

9,710

194

0.5%

192

Total Top 100 for year 2012

311,330,906

100.0%

---

39,539

---

100.0%

RANK

48

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

The U.S. average retail price for regular gasoline fell steadily through the end of 2012, to $3.25 per gallon on December 17 from $3.88 per gallon on September 17. After rebounding slightly in the final weeks of 2012, prices have held relatively steady through the first three weeks of 2013, increasing less than two cents per gallon to $3.32 per gallon. The stable prices in 2013 reflect Brent crude oil prices that have traded in a relatively welldefined range since the beginning of the year, and gasoline crack spreads that are largely unchanged, on average, from December. However, the stable national average does not capture the significant regional variation in gasoline prices, with the highest average prices for any Petroleum Administration for Defense District (PADD) on the West Coast (PADD 5) at $3.50 per gallon and the lowest average prices in the

Rocky Mountains (PADD 4) at $2.88 per gallon (Figure 1). Gasoline prices fell in fourthquarter 2012 as a result of modestly decreasing crude oil prices and narrowing gasoline crack spreads throughout the United States. Brent crude oil, the crude that U.S. product prices generally track, fell from a September 2012 average of $112.86 per barrel to an average of $109.49 per barrel in December 2012, a decrease of 8 cents per gallon. Most of that decline was in October, and Brent prices remained in a fairly well-defined range from late October through the end of the year. However, decreasing gasoline crack spreads contributed most of the late-2012 price decreases. Refineries have been running at high levels in response to strong distillate fuel crack spreads and low crude oil input costs in some regions,

particularly the Midwest (PADD 2) and Rocky Mountains. The high refinery runs have led to increases in gasoline production, at a time when gasoline demand in the United States has been stagnant. This situation is reflected in high gasoline inventory levels. In four of the five PADDs, inventory levels are above their fiveyear average, PADD 1 being the only exception. As of January 18, U.S. total gasoline inventories stood at 233.3 million barrels, 8.3 million barrels (4 percent) above their five-year average level and 37.8 million barrels (19 percent) above early-October levels. Some of this inventory build is attributable to typical seasonal patterns. In anticipation of spring refinery maintenance season, market participants will often build inventories in the fourth quarter and early first quarter while demand is lower. However, the 37.8-millionbarrel inventory build between the first week of October and midJanuary was 17.3 million barrels above the five-year average. After declining during the fourth quarter of 2012, the wholesale gasoline market has not seen large price movements in recent weeks, and the changes that have occurred have been generally offsetting, with crack spreads increasing somewhat on the Gulf Coast and in Los Angeles, while remaining relatively stable in New York and decreasing further in Chicago. As a result, U.S. average retail gasoline prices have increased less than two cents per gallon since December 31, 2012, averaging $3.32 per gallon on January 21.

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

49


As the major U.S. refining center, the Gulf Coast is a key market for gasoline and ships gasoline to regions throughout the country. While Gulf Coast gasoline markets have strengthened in January, they are still extremely weak. Crack spreads (measured here as the difference between the conventional gasoline spot price and the Brent crude oil spot price) in the region have been persistently negative since November. In January, they have thus far averaged -4 cents per gallon, an increase from the -13 cents per gallon they averaged in December. In December, crack spreads for conventional gasoline were also negative in Los Angeles but have since recovered, averaging 8 cents per gallon in January as several refineries have undergone maintenance on gasoline-producing units. New York crack spreads in January have been largely unchanged, up just a penny from the 12 cents per gallon they averaged in December. Chicago is currently the weakest market. Crack spreads in the area have been negative since November, but in January they have become even more negative, averaging -24 cents per gallon compared to -19 cents per gallon in December. Note that the Chicago crack spread is shown using Brent crude oil to be consistent with other regions; however, refineries in the Chicago market are more likely to have access to lower-priced West Texas Intermediate (WTI)-linked crudes, meaning refiners could be seeing small positive margins for gasoline. In this market structure, some refineries in the Midwest can access cheaper WTI-linked crudes and sell gasoline into a Brent-priced product market. This is because the Midwest has to attract some gasoline from the Gulf Coast. Similar to the situation in wholesale markets, stable retail gasoline prices at the national level mask regional variation. The most notable exception to the trend of stable prices has been in the Rocky Mountains. On November 5, Rocky Mountain prices were 12 cents per gallon higher than the U.S. average, but they fell to $2.88 per gallon by January 21, 44 cents per gallon lower than the U.S. average. While there are no observable spot prices for the Rocky Mountains, a similar dynamic is occurring there, where refinery runs are high because refineries in the Rockies seek to capture margins from the region’s lower crude oil costs. Because the Rockies are a relatively isolated market with few significant pipeline connections to other U.S. markets, high levels of gasoline production can sometimes depress retail prices in the region compared to the U.S. average; a similar situation occurred last year. Looking forward, EIA forecasts gasoline prices to rise moderately through the first half of 2013. This increase is partly related to the switch to summer-grade gasoline during the spring that typically encourages widening crack spreads at that time of year. Increasing wholesale gasoline prices are expected to be partially offset by declining Brent prices. EIA forecasts U.S. average regular gasoline retail prices will peak in May at $3.59 50

per gallon. Regional variation is expected to continue, with West Coast prices expected to average $3.79 per gallon in May and peak a month later than the national average at $3.82 per gallon in June. On the low end, Gulf Coast prices are expected to return to their typical position as the lowest in the country, peaking at $3.45 per gallon in May.

Gasoline and diesel fuel prices both up a penny The U.S. average retail price of regular gasoline increased one cent to $3.32 per gallon, down seven cents from last year at this time. The East Coast and Gulf Coast prices both decreased, while prices in all other regions increased. The East Coast price is $3.42 per gallon, down three cents from last week, and the Gulf Coast decreased a cent to $3.15 per gallon. The Midwest price increased seven cents to $3.22 per gallon, while the Rocky Mountain and West Coast prices both increased one cent, to $2.88 per gallon and $3.50 per gallon, respectively. The national average diesel fuel price increased a cent to $3.90 per gallon, five cents higher than last year at this time. Prices increased in all regions of the nation expect the East Coast, where the price decreased less than a penny to remain at $4.00 per gallon. The Rocky Mountain and West Coast prices both increased two cents, to $3.68 per gallon and $4.00 per gallon, respectively. The Midwest price is $3.85 per gallon and the Gulf Coast price is $3.83 per gallon, both an increase of one cent from last week.

Propane inventories decline U.S. propane stocks fell 3.1 million barrels to end at 60.9 million barrels last week, 10.1 million barrels (20 percent) higher than a year ago. Midwest regional inventories dropped by 1.5 million barrels, while Gulf Coast inventories declined by 0.9 million barrels. Rocky Mountain/West Coast stocks dropped by 0.4 million barrels, and stocks in the East Coast region declined by 0.3 million barrels. Propylene non-fuel-use inventories represented 5.0 percent of total propane inventories.

Residential heating fuel prices rise Residential heating oil prices increased during the period ending January 21, 2013. The average residential heating oil price increased by a penny to $3.98 per gallon, 5 cents per gallon higher than the same time last year. Wholesale heating oil prices increased by nearly 4 cents to just under $3.18 per gallon, 10 cents per gallon higher than last year at this time. The average residential propane price rose by 2 cents to almost $2.46 per gallon, 41 cents per gallon lower than the same period last year. Wholesale propane prices increased by 3 cents to nearly $0.93 per gallon for the week ending January 21, 2013, 31 cents per gallon lower than the January 23, 2012 price.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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PBE CLASSIFIEDS FOR RENT

RV LOT FOR RENT

$250.00 deposit/$450.00 month, all bills paid, which includes electric, water, sewer, and trash. This is a Private, One RV Lot, no other RV’s, small front yard. Conveniently located to Stores, Laundry mat, restaurants, Banks, Post Office, etc. Month to Month or Lease options available.

Located in Monahans, TX. IF INTERESTED PLEASE CALL STEVE 817-903-0128 OIL & GAS & HUNTING LEASES 1/2 ACRE LOTS for sale, 10 miles South of Colorado City, 806-549-7203. -------------------------------------------------2 ACRES for sale. 432-634-8526 -------------------------------------------------3 COMMERICAL lots Forida & Marienfeld Call 432-262-5673 -------------------------------------------------40 PLUS acres 6 miles south of I-20 on FM 715 $2750 per acre. Call 432-557-3366 -------------------------------------------------BEAUTIFUL LAKEFRONT lot located in a secluded inlet on Inks Lake in Texas Hill Country. Gorgeous trees and wonderful view of hill country. Approx. .5 acres with 85 ft of waterfront. Recent bulkhead and 2 boatslips added. $249,000. 210-508-1571 -------------------------------------------------CASH FOR YO U R MINERALS! Producing or non-producing minerals. Will pay top dollar. 325-232-7813 -------------------------------------------------COMANCHE COUNTY, 217 acres, approx. 32 ag. 86 grass, 60 hunting woods, 35 misc. 2 wells, stock tank, 100% minerals, on pavement, owners 46yrs. $2,250 ac. 325356-3637 -------------------------------------------------COUNTRY LIVING Lovely renovated one and half story older home 4 bd 3 bath, 24 x 48 shop building 18 x 31 attached storage. sprinkler system with 2 water wells. Partial outside fencing, coastal and pecan trees located on 7.50A Carbon area eastland County. For sale by owner 254-442-1942, 254-433-0396 52

LIGHTED ROPING arena - 14+ acres in Gardendale. Gary Luna Agent, The Real Estate Company. 432-352-1673 -------------------------------------------------FARM AND Ranch 266 ac. Menard County Motivated Seller. 288 ac. Mason County Hunting and Cattle Ranch Sammy Martin Broker 325-265-4244 www. huntingpropertiesrus.com FOR SALE $70000 OBO 2 Acre-Residential Lot in ‘La Entrada Estates.’ New sub-division off Loop 250 and 191, behind Mid Cities Church. For more info call: 325-277-9779 -------------------------------------------------HUNTERS PARADISE!!! NEW TO MARKET! 634 +/acres. Only 17 miles west of Abilene. Extremely rough terrain, canyons, hills, wet weather creeks, amazing views... Multiple ponds that held water throughout the drought. Deer, hogs, dove, quail, ducks, bobcats, coyotes... 1yr old single wide and a nice 30x40 metal barn with good working pens. Rural water and electricity. Truly a ‘MUST SEE’ place that won’t last long. Some minerals available. Days-325232-7813, Nights-806-470-9797 -------------------------------------------------MIDLAND/GREENWO OD AREA: I have 16 +/- 1 acre lots and 3 +/- 1.7 acre lots available immediately. Greenwood schools, underground electric to each lot, good water available, good roads, excellent soil, mobile homes welcome! Priced from $25,500 $37,500. Off Hwy 307 2 miles east of Greenwood. Text or call Britt Alexius@ (512) 573-5479 cell.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

FOR RENT

GARDEN COURT APARTMENTS ‘A jewel, tucked away in Old Midland’ Spacious 1 & 2 Bdrms w/ patios • Ceramic Tile • W/D Connections • In Select Units 2301 N. Pecos 432-614-1710 Must Have Good Credit!

NEW MANAGEMENT Spacious 1 & 2 Bedroom Apartments. Call 432-687-4514.

TO PLACE A CLASSIFIED AD, CALL

(432) 559-8848

HELP WANTED

NOW HIRING ADVERTISING SALES EXECUTIVES We have been growing rapidly here at Permian Basin Energy Magazine, and we are now accepting applications for outside & inside sales representative positions throughout the West Texas area. We are a respected and experienced publishing, printing & marketing company that publishes a monthly energy magazine, Permian Basin Energy Magazine, that caters to any and all individuals and companies whom have involvement/interest in the oil, gas, wind, coal, & other sectors of the energy industry. We also offer businesses a full range of marketing services including social media setup, social media management, logo and web design, search engine optimization, mobile applications, corporate training and much more. We offer great packages at competitive prices, with little competition, which, in turn, equals easy sales for you! As a company and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual selfimprovement, and mutual respect. We are committed to our clients and colleagues and have a passion for marketing and technology. This is an opportunity to work with a growing company, in a friendly environment and with unlimited earning potential! OUR OPPORTUNITIES INCLUDE: • Initial training and on-going support provided

Screen Printer & Embroidery Tech Immediate Positions Available: Experienced Screen Printer & Embroidery Tech. Requires a highenergy, detail oriented person. Call A-1 Sign Engravers, Inc/A-1 Embroidery & Screen Printing, Inc. at 800-876-7446 speak with Martin Baeza

• Commissions paid daily! • Sales goals, not sales quotas! • Growth within and upward advancement opportunities available in first 6 months of your first day on the job! • Flexible hours. Great for anyone looking to supplement their income on a part-time or full-time basis! OUR EXPECTATIONS & RESPONSIBILITIES OF THE SALES EXECUTIVE • Business to business sales • Good communication, lead generation, selling and closing skills • Make accurate representation about our services • Represent yourself in a professional attire and manner • Easy Web access and reliable phone (cell phone strongly recommended) • Previous sales experience preferred • Familiar with online marketing, blogging, and social media

If you are interested please email us at sales@pbemag.com. Feel free to call us with any questions 432-559-8848 or visit us online at www.pbemag.com.

Temporary Farm Worker 1 Temporary Farm Worker Needed. Employer: B. Craig Duke - Midland, TX. Attend to horses. Duties to include, but not limited to: assisting in delivery & care of new born foals; administering vaccinations & medications; feeding, training, cleaning and maintaining animal housing; and general farm maintenance. Employment Dates: 02/26/2013 – 12/01/2013. Wage of $10.18/hr. Worker guaranteed 3/4 of contract hours. Tools provided at no cost. Free housing provided to non-commuting workers. Transportation & subsistence reimbursed when 50% of contract is met. Apply for this job at the nearest TX Workforce Solutions or call 512-475-2571 and reference job order #TX6872516.

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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SALES JOBS

ENERGY & UTILITIES

Oil Field Sales Lighthouse Energy Solutions is a rapidly growing oil field service company seeking Outside Sales people. Qualified candidates must be self motivated & have ability to make cold calls in the field. Salary depending on experience. Must have good driving record and pass drug screening. Please call 432-699-7744 to make and appt. for interview. -------------------------------------------------Sales Rep Sales Representative for BHA. Apply in person: 2915 South County Rd 1255, Midland or Call Gary 432-563-1784.

Career Fair Liberty Lift. Our company management has a combined 150+ year’s experience in the Pumping Unit industry. Liberty Lift company leadership members are expert in their areas of responsibility and believe that Liberty Lift will be one of the market leaders in the Pumping Unit and Service business with the right team. Currently we are seeking: • Regional Pumping Unit Service Manager • Field Service Technicians • Field Service Supervisors •Field Service Sales • CDL Haul Truck Drivers • CDL Wench/Crane Operators • Administrative Assistant. Liberty Lift Career Fair! MCM Elegante, Odessa, TX. Mon., Jan. 28th -Noon til 8pm & Tues., Jan. 29th - 8am-Noon. Please contact Kim de la Pena at 432-889-9107 or email: info@ eventures-permianbasin.com.

NOW HIRING:

• Outside Sales Professionals • Administrative Assistant • Editorial Writers/Contributors • Distribution Manager

CALL OR EMAIL TODAY!

432-559-8848

SALES@PBEMAG.COM

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Entry Level Field Techs & Project Manager TitanLiner, Inc. currently has the following employment opportunities in our Midland, TX location: Entry Level Field Technicians and Project Manager. All positions require at least a high school diploma or equivalent. Oilfield experience preferred. CDL A required if applying for Field Technician. Previous management/supervisor experience required for Project Manager position. Qualified applicants may submit resumes to hr@titanliner.com. No phone calls please. HSE Manager TitanLiner, Inc. is looking to fill the position of H.S.E. Manager. Position will be based in our Corporate Office in Midland, TX. Responsibilities include the development & implementation of HSE & DOT program for our company, ensure compliance with OSHA & DOT, investigate work place incidents, conduct new hire safety orientations, & perform regular HSE/DOT site audits to ensure compliance. 5 or more years of work experience in the HSE discipline (preferred in Oil & Gas Industry). Safety degree and/or related certifications required. Must be able to travel 50% of the time. Must have a valid US driver’s license & pass standard background check & drug test. Compensation DOE. Qualified applicants may submit resumes to hr@titanliner.com. No phone calls pls. Tubing Tester Confidential FT . Experienced Tubing Tester, CDL with tank endorsement required. Call 432557-2809 or 432-557-2807.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2013

FEBRUARY 2013 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Permian Basin Energy Magazine February 2013 Issue