FREE
VOLUME 3 NO. 1
The Power of
JANUARY 2015
TEXAS
Battle for Market Share: OPEC vs American Producers 8
Workforce Predicts Strong 2015 Despite Dropping Oil Prices 12
U.S. crude oil production expected to grow in 2015 16 • U.S. RIG COUNT • TOP 35 Drillers & Operators
Industry Data
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News
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Events
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Auctions
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Calendar
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RESTAURANT BITES
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Energy
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Tech
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JANUARY 2015
contents
Pbe Features 8
8
Battle for Market Share: OPEC vs American Producers
12 Workforce Predicts Strong 2015 Despite Dropping Oil Prices 16 U.S. Crude Oil Production Expected to Grow in 2015
Other Editorials
15 Calendar of Events 20 Conferences in January - February 21 Upcoming Auctions
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22 Advice for Mineral Owners from Permian Basin Land Girl 24 "On Points," with Ronnie Volkening, President and CEO of the Texas Retailers Association 27 Safety Tips - Trading Safety for Dollars 28 Festivals and Events in Texas 30 PBE Cares - West Texas Food Bank 32 Tech Bites - How the Wind Farms of the Future could be Underwater 34 PBE News Briefs: Basin, Shale, State, Government, Nation, Offshore & World 42 Restaurant Bites - The Jazz CafĂŠ 44 PBE Inspires - Rules of Engagement on Race 46 By The Numbers: Texas Rig Count, Top Drillers, Top Operators 49 This Month in Petroleum
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LETTER FROM
THE EDITOR Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree." - Martin Luther As we begin a new year, I can't help but feel the excitement in the air among many of my friends and colleagues in the oil and gas industry. Sure there has been a lot of serious discussions, big decisions and moments of tension surrounding the lagging oil prices that closed out 2014, but there still remains that undeniable West Texas spirit of hope and determination to turn the page on a new year, a new chapter and a refreshed energy to keep the progress moving forward. You'll hear these sentiments echoed in several stories this month as local business leaders express their positive projections for 2015 and confidence that the market will bounce back. You'll also read about a locally owned and operated restaurant in Monahans that's creating a cultural oasis in West Texas. A moment of reflection is needed now more than ever and can be found in this months PBE inspires by pastor Daniel Stephens of Mid Cities church. You'll also learn about a local nonprofit who works year round, in good times and bad to help those who are in desperate need of a meal. Hopefully you can also find some hope and encouragement as you look forward into this next year and find the same confidence that many oil and gas veterans have right now in this ever fluctuating and always resilient industry.
Carlos Madrid Editor in Chief/Publisher sales@pbemag.com
/PBENERGYMAG @PBENERGY
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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EDITORIAL CONTRIBUTORS
PBE MAGAZINE CONTACTS VOLUME 3 NO. 1
EDITOR IN CHIEF/PUBLISHER Carlos Madrid sales@pbemag.com 432. 559. 5886
Taryn SnideR FREELANCE WRITER tarynsnider@gmail.com
ART DIRECTOR/LAYOUT & GRAPHICS Luke Pawliszyn Lukasz Design Studio West Hollywood, CA luke@lukaszdesign.com ADVERTISING For advertising info call 432. 559. 5886 or email sales@pbemag.com
AUDRIE PALMER FREELANCE WRITER audrierpalmer@gmail.com
ACCOUNT EXECUTIVE Dominique Brown dominique@pbemag.com 432. 599. 3127 SUBMISSIONS Submit story ideas & other news to marcy@pbemag.com PUBLISHED BY: PBE Magazine, LLC. Permian Basin Energy Magazine 4500 Erie Drive Midland, TX 79703 Main Phone: 432. 559. 5886
DANIEL STEPHENS SENIOR PASTOR Mid-Cities Community Church • Midland, TX daniel.stephens@midcities.org
www.PBEMag.com
/PBENERGYMAG
@PBENERGY Aaron Campbel American Safety Services, Inc.
Copyright © 2015 Permian Basin Energy, Inc. • Mad Ads Media All rights 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: sales@pbemag.com.
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Kimberly Smith CEO Development Resources, Inc.
The Power of
TEXAS
www.PBEMag.com
To Advertise call
(432) 559 - 5886 or email
sales@pbemag.com
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Battle for Market Share:
OPEC vs
A meri c an P r o d u c ers by Taryn Snider
It’s the beginning of a new year and with that comes new budgets. While everyone in the oil business is planning for 2015, the 40% drop in oil prices are consuming their thoughts. Many oilfield veterans are experiencing déjà vu when they think of the late 80s oil bust of similar circumstances: a saturated market driving prices down. Last October, it was feared that oil might drop to $75 or $80 per barrel by the end of the year. It proved to be much worse than that when the price of crude reached $60 by mid-December. While the fate of just about everyone affected by the oil industry – which means everyone in the Permian Basin whether they admit it or not – hangs in the balance, industry leaders have been evasive about any definite plans for the future. What some of the heavy hitters are willing to say is that they’re remaining optimistic. The CEO of Exxon, Rex Tillerson, said their company could still operate successfully even if prices fell down to $40. Chevron and Pioneer Natural Resources have both said they’re evaluating their 2015 plans and won’t be sharing 8
any budget information until the first quarter of next year. As many companies stall the release of any plans, it’s safe to bet that 2015 will look a little different than 2014. Even if most of the workforce remains, much of the unnecessary spending will likely fade away which isn’t a terrible thing. While we’re waiting to find out what exactly is going to happen to our community, there seems to be a lot of speculation going on regarding exactly why prices have started to go down in the first place. The most common theory is an oversupplied global market. But the real question is why is the market flooded? The trouble really started when OPEC met in late November and declared a calculated attack on
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
U.S. oil production and their weapon was a deliberate saturation of the market. The good news is that this can only go on for so long. They’re essentially shooting themselves in the foot and their producers with less of an economic edge (Algeria, Iran, and Venezuela) are merely collateral damage. It’s easier to be optimistic when you know that when we’re hurting as a result of low oil prices, so are they.
Meanwhile, not much has yet to change in the Permian Basin. The rig count is only slowly dwindling and service companies have been cutting unnecessary costs and renegotiating prices but business has continued as usual. Some company managers consider times such as now as an opportunity to pick up good employees from other companies that couldn’t weather the storm.
Something else to consider is that congress has the power to give the United States a stronger, more competitive edge in this fight by lifting the ban on oil exports. Such a bill was introduced in early December by House Republican Joe Barton.
But the flip side to that is that workers who fall short of desired productivity might be getting the boot. One other possibility that arises during challenging times is the opportunity for capital investment. When economic output contracts, prices are driven down and every trader on Wall Street knows that that is when it’s time to buy.
It’s argued that the 40 year old ban, set in place to protect the United States from skyrocketing oil prices during shortages, doesn’t make sense today due to an abundance of global oil supply. Furthermore, keeping ourselves out of the oil exporting game benefits OPEC and keeps the United States at a disadvantage.
Although this looming down time might last a little longer than we want it to, it’s not expected to last long enough to cause major damage. While our eyes remain on industry leaders and as they portray optimism, we’re reminded that it’s okay to be concerned but it’s still early to panic.
Lawmakers worry that the lift would raise gas prices, hurting the overall consumer despite reports suggesting otherwise. It’ll be interesting to see how that plays out during the new Republican controlled Congress when they meet this month.
One more reason to be optimistic is that this situation isn’t another 80s oil bust. In that situation, OPEC wasn’t waging a price war against U.S. dominance. OPEC may soon learn a lesson in the determination of the American shale oil industry.
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Workforce predicts strong 2015 despite dropping oil prices
Officials: Area needs time to slow down,catch breath by Audrie Palmer
Looking ahead to what 2015 holds, many experts in the oil and gas industry expect the workforce to remain constant in the Permian Basin with unemployment rates in the area to still be the lowest in the state in the coming months. Willie Taylor, director of Permian Basin Workforce Development Board, has been in the business for 42 years and while he said it seems like the price of oil dropping seemed to come rather quickly and overnight, it may take anywhere from six months to a year for the area to recover.
working in the man camps may be laid off and the first to go.
“You know as well as I do, I don’t think we’ll recover real fast,” he said.
Austin economist Brian Kelsey reported that if the oil and gas industry earnings in Texas fall 20 percent, the state could lose 212,000 jobs – specifically those in the Eagle Ford Shale and Permian Basin, which are the largest oil production areas in the state.
Talking with his board members and other industry leaders, Taylor said those that are contract workers and 12
Last month, reports that Texas is in danger of losing billions in revenues and hundreds of thousands of jobs due to the declining price of oil surfaced.
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
While earnings drive significant portion, they also affect the overall economic activity in the state. “Consumers may enjoy seeing lower gas prices, but falling oil prices can hurt more in other ways,” he said in a Cox Newpaper story last month. The oil and gas sector accounts for 411,372 in Texas or 3.2 percent of the jobs statewide. But in Midland and Odessa, that percentage is much higher – about 25 to 30 percent, said Taylor.
we expect progressive building to still happen in 2015,” he said. “Midland can slow down but still be real fast and the economy strong.” “This recalibration will help us to be stronger than before.” Taylor echoed the idea of a recalibration for the local economy. With the shortage in employees in other sectors in the area, he said that he hopes many will use this time to go back to school and finish their education. With a shortage of 250 teachers in the Midland and Odessa school districts and other areas needing employment, he hopes that they’ll be able to grow the local workforce and continue to have the lowest employment in the state.
But Midland and the Permian Basin continue to show the lowest unemployment rates in the country, with a 2.3 percent unemployment rate in November, down from 2.5 percent in October and 3 percent in November 2013. Those are figures that Taylor predicts will withstand the dropping price in oil.
“The labor force never really did catch up; we’re still running behind,” he said.
Still, aside from the oil and gas industries, there is still a shortage of employees in all sectors in the Permian Basin, such as construction, medical, education and county and city governments. CEO and President of Midland Chamber of Commerce Bobby Burns said that it’s difficult to project the predictions for the New Year, but that the chamber has about 1,300 businesses as members and 70 percent of those are small businesses. “They may not be oil and gas businesses but they are definitely impacted,” he said. Burns added that while the impact may slow things down, Midland and the local area needs this time for adjustment and recalibration. “In many ways, the city needs the time to catch our breath. It’s not all bad at all. The steep decline we saw,
The Workforce office will continue to recruit despite the price cut in oil to fill the local jobs that are still available. And even last month, Taylor added the area was still bringing in new employees from areas such as Florida, El Paso, Las Vegas and California and averaging between four and five thousand new employees each month. He also hopes that with the slowdown, it’ll give elected officials the chance to work on the area’s infrastructures, roads and highways. The Permian Basin currently has one of the highest traffic fatality rates in the state and Taylor said he hopes to see a safer work force in the coming months.
We are looking at a
steady year as we are looking forward,
he said.
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OBSERVANCES AND CELEBRATIONS
JANUARY 2015 2
Birthstone: Garnet Flower: Carnation, Snowdrop
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The Sandhills Stock Show and Rodeo
National: Blood Donor Month, Braille Literacy Month,
Jan. 2–10. Ector County Coliseum 4201 Andrews Hwy. Odessa, TX
Hot Tea Month, Oatmeal Month, Soup Month
Feast of the Epiphany - Three Kings Day
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Caregiver Support Information Meeting
10:30am-12pm. Memorial Health Care Center. 212 NW 10th St. Seminole, TX 79360. Susan Frederickson, Caregiver Information Specialist. 432-262-4962 sfrederickson@aaapb.com
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NETWORKING PROVIDERS OF SERVICES IN THE PERMIAN BASIN
Speakers during lunch. 11:30 am. 1A networking group connecting people to improve the quality of life in the Permian Basin. State agencies and individual owned businesses providing services to the Permian Basin area. First Visit Free. Annual dues $12.00 (prorated). Bring your business cards, brochures and name tag. Purchase lunch, if you desire. Mia Piaci Italian Restaurant - Strip Center corner of University and Grandview.
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National Pharmacist Day
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Martin Luther King Jr. DAY
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National Pie Day
National Puzzle Day
FEBRUARY 2015 14
Birthstone: Amethyst Flower: Violet
Valentine’s Day Presidents’ Day
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Presidents’ Day is observed on the 3rd Monday in February to honor Washington’s Birthday, the first U.S. President and Abraham Lincoln and other US Presidents. JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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U.S. crude oil production
expected to grow in 2015 Source: www.eia.gov Principal Contributors: Richard Yan and Jozef Lieskovsky
The recent decline in crude oil prices has created the potential for weaker crude oil production. EIA's Drilling Productivity Report (DPR) includes indicators that provide details on the effect low prices may have on tight oil production, which accounts for 56% of total U.S. oil production. Analyzing these indicators and the changes in oil production following the drop in crude oil prices during the 2008-09 recession may offer some insight into possible near-term oil production trends.
The price of West Texas Intermediate (WTI) crude oil delivered to Cushing, Oklahoma declined more than 31% from June to November 26 and another 7% after the late November announcement of the Organization of the Petroleum Exporting Countries (OPEC) decision to maintain the current production level. At $60 per barrel, the current price of oil is likely approaching or already below the expected per-barrel costs of some of the most expensive U.S. tight oil projects. 16
Some of the most active production fields in the country are in North Dakota. Indicators tracked by the DPR and North Dakota's Department of Mineral Resources (DMR) cover much of the exploration and production process, from planning to production. These indicators include: Permits- Before drilling begins, producers must sign lease contracts and apply for permits to drill exploration and development wells.
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Rig movement- Drilling rigs must be secured and moved to permitted locations. Spuds- Spudding is the term for the ground-breaking process of a new drilling project. In North Dakota, the spud count is a count of new wells drilled. Based on the most recent data released by North Dakota's DMR, drilling and production activities in the state have not slowed, despite the significant decline in domestic crude oil prices since July 2014.
to January 2009, after which time production began increasing. Looking forward, EIA expects 2015 drilling activity to decline as a result of less-attractive economic returns in some areas of both emerging and mature oil production regions. Many companies will redirect investment away from marginal exploration and research drilling and into core areas of major tight oil plays.
Oil production in September 2014—the latest data available—rose 5% from the prior month.
However, projected oil prices remain high enough to support development drilling activity in the Bakken, Eagle Ford, Niobrara, and Permian Basin, which contribute the majority of U.S. oil production growth.
The number of permits issued in October 2014 was 28% above the September level, but it dropped 30% in November. However, when normalized based on the number of business days during those months, October is only 17% above September's level, and November is only 10% lower than October.
EIA expects U.S. crude oil production to average 9.3 million barrels per day (bbl/d) in 2015, up 0.7 million bbl/d from 2014, but down from expected growth of 0.9 million bbl/d in last month's Short-Term Energy Outlook.
Although the current economic situation is fundamentally different from the recession of 2008-09, changes in oil prices, production indicators, and production volumes during the recession may offer insight into what may happen next with U.S. shale oil production. During the 2008-09 recession, monthly average WTI prices fell by 71% to $39.09 per barrel between June 2008 and February 2009. At the time, shale oil production in North Dakota was still in the testing phase and thus relatively expensive.
However, all of the decrease in forecast production growth comes in the second half of 2015. EIA revised production growth downward by 140,000 bbl/d and 270,000 bbl/d in the third and fourth quarters, respectively, compared with the previous forecast. However, this forecast remains particularly sensitive to actual prices available at the wellhead and drilling economics that vary across regions and operators.
Drilling and production continued to increase until November 2008, when WTI prices dropped below $57 per barrel. Below $57 per barrel, the number of projects that were interrupted increased significantly, with the number of permits declining 73% from December 2008 to July 2009, the number of rigs declining 62% from November 2008 to May 2009, and the number of spuds declining 55% from November 2008 to April 2009. However, the decline in production was not nearly as dramatic, falling only 13% from November 2008 JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Conferences in JAN. - FEB. 2015 API Inspection Summit 01/26/2015 - 01/29/2015 Galveston TX, USA www.api.org/events-and-training/calendar-ofevents/2015/inspection-summit
IADC Health, Safety, and Environment Conference and Exhibition 02/03/2015 - 02/05/2015 Houston TX, USA www.iadc.org/events
API Exploration and Production Winter Standards Meeting 01/26/2015 - 01/30/2015 New Orleans LA, USA www.api.org/events-and-training/calendar-ofevents/2015/e-p-winter
SPE Hydraulic Fracturing Technology Conference 02/03/2015 - 02/05/2015 The Woodlands TX, USA www.spe.org/events/hftc/2015
API-AGA Joint Committee on Pipeline Welding Practices 01/28/2015 - 01/29/2015 New Orleans LA, USA www.api.org/events-and-training/calendar-ofevents/2015/aga World LNG Fules Conference 02/02/2015 - 02/04/2015 Houston TX, USA www.worldlngfuels.com/about World LNG Fuels Conference 02/02/2015 - 02/04/2015 Houston TX, USA www.worldlngfuels.com/about
International Pipeline Pigging & Integrity Management Conference and Exhibition 02/09/2015 - 02/12/2015 Houston TX, USA www.clarion.org/ppim/ppim15/Pigging-and-Inline-Inspection.php Annual ARC Industry Forum 02/09/2015 - 02/12/2015 Orlando FL, USA www.arcweb.com/events/arc-industry-forumorlando/pages/default.aspx NAPE Expo 02/11/2015 - 02/13/2015 Houston TX, USA www.napeexpo.com/nape-shows/winter-nape International Polyolefins Conference 02/22/2015 - 02/25/2015 Houston TX, USA www.spe-stx.org/conference.php Laurance Reid Gas Condtioning Conference 02/22/2015 - 02/25/2015 Norman OK, USA www.ou.edu/content/outreach/engr/lrgcc_home. html
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Leading Auctions in the Oilfield Industry. Upcoming Auctions and Auction Equipment listings from Tradequip International’s online and site-held auction companies. Saurce: Tradequip International
Drilling Rigs
Prod. Equip.
Drilling Equip.
Tubular Goods
Oilfield Trucks
Oilfield Trailers
Parts & Tools
Support Equip.
www.tradequip.com
SOUTHCENTRAL
AUCTIONS
COMPANY
DATES
LOCATION
INVENTORY
Public Auction
Machinery Auctioneers of Texas
January 14, 2015
Odessa, TX
No Lots are Currently Posted for this Auction
Well Service Rigs & Power Swivel
Kruse Energy & Equipment LLC
January 14, 2015
Laredo, TX
Oil Well Drilling & Industrial Equipment
The Wiley Real Estate Group Inc
January 21, 2015
Midwest, WY
Complete Liquidation
HYPERAMS LLC
January 28 February 18, 2015
Wood Dale, IL
Drilling/Well Service/ Oilfield Trucks & Trailers
Kruse Energy & Equipment LLC
February 4-5, 2015
Oklahoma City, OK
No Lots are Currently Posted for this Auction
INTERNET AUCTIONS
COMPANY
DATES
LOCATION
Pipe & Equipment Sealed Bid
Network International Inc
January 14, 2015
Internet
Pipe & Equipment Auction
Network International Inc
January 21, 2015
Internet
Pipe & Equipment Sealed Bid Auction
Network International Inc
Jan. 28-Feb. 11, 2015
Internet
INVENTORY
No Lots are Currently Posted for this Auction
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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ADVICE for Mineral Owners from a Permian Basin Land Girl Continued Demand for Energy Resources in 2015 I have been curious about OPEC for months, so I decided to research the Organization of Petroleum Exporting Countries. OPEC is an international group of oil countries including: 1) Algeria 2) Angola 3) Ecuador 4) Islamic Republic of Iran and Iraq, Kuwait, 7) Libya 8) Nigeria, 9) Quatar 10) Saudia Arabia 11) United Arab Emirates and 12) Venezuela OPEC was created in 1960 in Baghdad, Iraq. A few things you might know about OPEC. 1) They provide an annual and monthly global economic outlook on energy at OPEC.org 2) The United States is not a part of OPEC. However, OPEC expends resources studying the United States and other countries to track data and study global population growth, energy consumption, the use of fossil fuel consumption, and overall energy consumption. Their 367 page World Oil Outlook 2014 discusses multiple factors that we discuss in the Permian Basin every day. Whereas, we often look at the economic changes regionally (and quite personally), this OPEC report reviews global data. 3) The United States IS a part of the organization for Economic Co-Operation and Development (Paris, France) which gathers global data which contributes to OPEC global data analysis. (OECD.org) After reviewing portions of their 367 page World Oil Outlook 2014, I want to apply a Liberal Arts approach to oil and gas, and extract and simplify a few points. In its simplest terms, the world population is expected to continue to grow by 2014. Similar to the US Census, this report reviews projected global growth. As long as the world population increases, so will the demand for food, clothing,
and energy. I surmise from the lengthy charts and data, that every second a baby is born in the United States, then the baby will need the basic elements to survive in an urban, suburban or rural environment - 1) Food 2) Clean Water 3) Clothing 4) Fuel for Transportation We should assume that as individuals grow up and move into the education and the workforce, that fuel will be needed. "Global passenger cars will double by 2040 still dominated by oil fuel powertrain technologies." (World Oil Report 2014) Just as farming communities are planting vegetables to plan for population increases, then we need to keep harvesting oil for fuel! Fuel is not one of the five basic food groups, but I will call it the NEXT basic need in our suburban culture! Fuel is critical for transportation to school, work, medical resources, to purchase groceries and household needs! Everyone who contributes to the oil exploration and production in the Permian Basin is a significant contributor to what this OPEC report calls a basic necessity of individual and global consumption. Therefore, I am encouraged that our Permian Basin Crude oil is in critical demand. PBE Readers...what are you thoughts on OPEC and how it impacts the Permian Basin? Call 432-620-8700 to discuss your views with Morris Burns on Tuesday morning or Kimberly Smith on Saturday at 1:00 on kwel.com When you call in you'll receive a complimentary treat from Orchard Sweets designer cupcakes! Truly yours, Kimberly Smith, CEO Development Resources, Inc. can also help retrieve and inventory your mineral estate. @permianlandgirl on twitter or landmaam.com
Ask the Permianlandgirl on KWEL.com, AM 1070 and FM 107.1 - every Saturday at 1 PM. Call 432-620-8700 to ask questions or email me at permianlandgirl@gmail.com Wishing you a Happy New Year! Let your minerals be a joy in your life‌ Contact us to help us inventory your minerals. www.permianlandgirl.org 22
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"On Points"
with Ronnie Volkening, President and CEO of the Texas Retailers Association Source: The Texas Economy
We recently spoke with Ronnie Volkening, who has served as president and CEO of the Texas Retailers Association since 2007. The Texas Retailers Association represents retail outlets of every size and sector throughout the state. To learn more about TRA, visit www.txretailers.org. Mr. Volkening also has managed state government affairs for Frito-Lay and during his career as well as held the position of senior director of government affairs for 7-Eleven for 15 years. A Texas native, he has an undergraduate degree from the University of Texas at Austin and earned his Juris Doctor from the University of Houston.
On the current state of the Texas retail industry
Texas retailers are doing fairly well as the state continues to outperform the rest of the country. We've now had 54 consecutive months of year-to-year sales tax revenue increases, so that's a good sign. While I wouldn't necessarily label the growth as 'robust,' it has been fairly strong. The Texas consumer is a little more optimistic than those in other regions of the country, in that our economy remains strong and our unemployment rate is relatively low compared to other states. 24
We still see some concern and trepidation about the future and that may be reflected in putting off the purchase of big ticket items ‌ sales in that category may not be as healthy as we'd like to see. Also, there have been food prices increase, and they are projected to continue. These increases have diminished some of the consumer's spending power, and that's having somewhat of an effect. The school sales tax holiday in August provided a shot in the arm for retailers and a blessing for parents of Texas schoolchildren, who were able to make a lot of purchases to get ready for the new school year. That's always a good indicator of how strong the rest of the year will go.
On hiring and job growth in the retail sector
While many retailers are reporting stronger year-overyear sales; that does not always create a great deal of hiring. There is both a lingering concern about the overall economy, as we look over our shoulders to
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
the cutting edge of the way marketing works in the 21st century. This technology change also raises concerns about data security. We've seen data breaches increase across all business sectors, which will necessitate costly technology changes in the infrastructure inside retail stores and financial institutions.
On getting merchandise and shoppers – into stores
Historically, Texas has enjoyed an adequate transportation infrastructure that allowed for timely and efficient shipments of products to the marketplace. But with the incredible population growth we've experienced in Texas, decisions about improving our roads must become a priority. We need government to be responsive to the needs of the entire community and that includes supporting infrastructure enhancement – both for water and for transportation. It is not inconsistent with fiscal responsibility to look at infrastructure enhancement as necessary to accommodate our rapid growth of our population.
the recession, as well as uncertainty about regulatory activity coming from the federal level. This uncertainty makes it difficult for employers to project their future business growth and needs. There are other factors that are perhaps giving retailers some pause in making decisions about hiring in big numbers. For example, online sales are taking a larger share of the total market share in recent years. Additionally, activity in the political world, in terms of discussions suggesting increasing the minimum wage and increasing the sales tax, are making retailers be very careful about making commitments to hire new folks.
We need to make smart and reasoned decisions about spending on our transportation infrastructure because it is an essential part of retail to be able to deliver the goods to the customer. We are very cognizant of the fact that we need to look at those issues responsibly and make smart decisions about expenditures. And just saying 'no' to any new expenditure is no longer a viable or even responsible response to the challenges Texas faces.
Concerns regarding healthcare and minimum wage weigh equally on the minds of hiring departments, in terms of the challenge for employers to meet the healthcare mandates and sustain a good and strong workforce.
On technology's impact on the retail sector
The ever rapid rate of change in technology empowers consumers to have different ways to shop, but it also presents challenges for retailers who want to stay on JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
SAFETY TIPS T RADING SAFETY FOR DOLLARS Estimating the Cost of Unintentional Injuries is a question that should always be calculated and considered. How Much Do We Really Pay? The National Safety Council helps estimate the cost of fatal and nonfatal unintentional injuries at home, at work and in public, as well as the cost of motor vehicle injuries. Our nation's economy is significantly impacted by the total cost of unintentional injuries. Some of the most common places these injuries are found would include: • Motor Vehicle Injuries • Injuries at Home • Injuries at Work • Injuries in Public The direct costs of an injury are the easiest to see and understand; however there are many others that will follow that aren't as easily predictable. These costs include emergency room and doctor visits, medical bills, medication and rehabilitation. Indirect costs of an injury are often overlooked. These costs can amount up to 4 times the direct cost of the injury. Indirect costs include administrative time dealing with the injury and medical care, raises in insurance costs, replacing the hours lost of the injured employee with hiring another employee, loss of reputation and confidence in employees and clients, unwanted media attention and more.
The total cost of an injury are surprising. Beyond the direct costs greatly increase the overall costs. This is the true amount that the injury will cost in terms of money. The profit margin of a business determines the revenue required to offset losses from an injury. Even with high profit margins, no one wants to see their hard work wasted paying for preventable injuries. The ultimate cost that severely outweighs any financial cost will be the moral and spiritual cost that will take a toll on anyone who was either involved or affected by an injury. Some of these costs will include loss of tem morale, sleep, motivation, and focus. All of life's materialistic possessions can be replaced and rebuild, however a life of a person's quality of life is not replaceable. Statistics are simply numbers until one of those numbers represents someone you know. At that point it's a tragedy to them and anyone they knew. Every day should be approached with the same mentality and attitude as any other bright and sunny sunrise before. There are always plenty reasons to live for. Our Fate is determined by how far we are prepared to push ourselves to stay alive - The decisions we make to survive. We must do whatever it takes to endure and make it through alive. - Bear Grylls Aaron Campbel American Safety Services, Inc.
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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January - FEBRUARY 2015
TOP
FESTIVALS AND EVENTS IN TEXAS All across Texas, a variety of festivals, events and attractions are a great way to have fun and to spend time with your family. The Sandhills Stock Show and Rodeo January 2-10 Ector County Coliseum. 4201 Andrews Hwy. Odessa, TX 432-366-3951 www.sandhillsstockshowandrodeo.co
FAMILY SCIENCE NIGHT January 8 6pm-8pm Petroleum Museum. 1500 Interstate 20 West. Midland, Texas 79701 Get ready for a roaring good time at the Petroleum Museum! Explore your inner archeologist as you make your way through the prehistoric era! You’re not going to want to miss this dino-mite adventure! Admission is FREE and refreshments will be provided. Family Science Nights are brought to you by our generous sponsors at Chevron.
Midessa Boat, RV, Sport & Gun Show February 6-8 Ector County Coliseum. 4201 Andrews Hwy. Odessa, Texas 79762. Adults $6. Seniors $5. Children (3-11) $3. Coliseum will feature boats, ATVS, and misc. booths. Building A - Specialty booths. Building B, C, & D -Recreational Vehicles. Building E- Gun Show. Building G-Family Power Sports & Army Bass Anglers, Kids Fishing Pond. Johnny and Carol Ramsey. 432-381-3324 www.midessaboatshow.net 28
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
31st ANNUAL PORT ISABEL “LONGEST CAUSEWAY RUN & FITNESS WALK” January 10 Port Isabel - In its 31st year, enjoy 10K certified run, #TX05009WG, and 3-mile fitness walk. Over 4,800 participants. Call Chamber of Commerce for info and applications. (800) 527-6102 RAINS COUNTY EAGLE FEST January 17 Emory - “The Eagle Capital of Texas” hosts its 20th annual Rains County Eagle Fest at Rains High School on Hwy 69. View Bald Eagles, plus enjoy storytellers, lecturers, live bird demos, arts/crafts, bus & barge tours, food and music. www.eaglefest.org. Rain date is January 24. (800) 561-1182.
Masterworks III: There's a Good Chance You'll Love Strauss January 24 Wagner Noel Performing Arts Center. 7:30-9:30pm. Featured soloist Christopher Chance, MOSC’s Principal Clarinet, will perform Oscar Navarro’s “tour de force concerto” for clarinet and orchestra. The night’s virtuosity will continue with the memorable music of both Johann and Richard Strauss. 432-552-4430 www.mosc.org
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Midland on Tap January 17 Commemorative Air Force. 5-8pm. Join us on Friday, January 17th for the Midland on Tap Craft Beer Festival at Commemorative Air Force from 5pm-8pm. Enjoy samples of more than 100 beers from a variety of the country's best craft breweries! In addition to the incredible selection of beer, there will be live music, various vendors and mouth-watering food available for purchase. www.midlandontap.com UPTOWN SWIRL January 17 Brenham - Treat yourself, your spouse & your friends to a fun afternoon and evening of sipping wine and swirling through historic Downtown Brenham from 3pm-7pm. For a small fee, attendees enjoy a tasty wine sampling & a collectible wine glass. For tickets & details: (979) 337-7384 or www.BrenhamUptownSwirl.com
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JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Cares
West Texas Food Bank
Back in 1985, life in the Permian Basin was slow. The decline in the oil business known as “the bust” had not only changed the landscape of the city as drilling had come to a halt, but also had changed the heart of the people. The boom had come and gone, but what was left behind was the community – a group of caring individuals who banded together to ensure that all West Texans, no matter the good times or the bad, had access to food. It was during this time that the West Texas Food Bank was born. Formed by a group of concerned citizens in July of 1985, the organization boasted a humble budget of $50,000 and distributed 203,000 pounds of food to 40 local agencies using donated space and two paid staff members. Fast forward to almost 30 years. With a reach of 34,000 square miles, the West Texas Food Bank distributed 5 30
million pounds of food to 19 counties in West Texas and over 70 partner agencies just last year. What started out as a little food pantry that could, has grown into a major food distribution center that will. During the near 30 years that the Food Bank has been existence, the core mission of the organization remains the same – to feed the hungry. Regardless of the economic status of the Permian Basin, hunger continues to devastate families, children and the hungry. No one chooses to be hungry. Any one of us could face hunger for any number of reasons. The West Texas Food Bank service area is affected by high rates of hunger, poor nutrition and related health problems of our clients. Seventy-four percent of the households we serve have incomes at or below the poverty level – that is $23,850 for a family of four. Sixtytwo percent of households choose between paying for
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Single moms, like Amanda, often have to choose between paying for food or paying for medical care for their children.
food and paying their mortgage and 40 percent of the clients we serve are children. Focused on more than just providing food, the West Texas Food Bank is positioned to do more and be more. At the core of this evolution will be the construction of two new facilities, one in Odessa to be complete in October of 2015 and the other in Midland to be complete in March of 2016. The creation of the two new buildings will no doubt increase the distribution power of the Food Bank, but will also transcend the role of the Food Bank in the community. Programs keyed to children and nutrition, initiatives geared to feeding the elderly and efforts to provide food to the homeless will emerge as top themes for the West Texas Food Bank. The new facilities will not only allow for more programming opportunities, but will include
high-tech design concepts such as an underground greenhouse, living wall herb garden and outdoor food garden. As a nonprofit, non-governmental hunger relief organization, the West Texas Food Bank is proud to fight hunger in the Permian Basin. Working with our partner agencies, we embrace the pioneering spirit of those individuals who saw the need so many years ago to feed those in need.
We invite you to help fight hunger in West Texas.
To volunteer or give to the West Texas Food Bank, please visit www.WTXFoodBank.org or call (432) 580-8333
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Tech
Bites
Source: CNN.com
How the wind farms
of the future could be underwater
The United Kingdom may seem an unlikely candidate to lead a renewable energy revolution; it doesn't have much sun for solar power, it doesn't have much space for wind power and it doesn't have giant coursing rivers for hydro. It does, however, have thousands of miles of coastline and a lowering and restless sea whose tides ebb and flow with tremendous force. Energy companies in Scotland and Wales are seeing the potential from underwater turbines which tap a constant and predictable source of energy, are invisible and can produce as much electricity as a conventional wind turbine.
Sea water is 832 times denser than air, which means the turbines can be smaller while producing a similar amount of energy to a wind turbine. The force of these tides also means the turbines can be placed closer together, taking up less space on the sea bed than an equivalent wind farm on land.
If a test project in the fast flowing marine waters of Pentland Firth in the far north of Scotland goes well, submerged turbines could eventually power as many as 400,000 Scottish homes, according to the Scottishgovernment backed scheme.
Apart from being invisible -- obviating a factor that has stalled many wind farm projects on land -- the marine turbines have the great advantage of tapping an energy source that does not rely on the weather.
"The demonstration array at the moment is 6MW or four turbines. Hopefully this will be the catalyst for further investment," MeyGen CEO Dan Pearson told CNN. "We are looking to complete construction of that in 2016."
Other renewables such as wind, wave, solar and even hydroelectricity depend in large part on seasonal and climatic features, tidal turbines, meanwhile, get two regular tide changes a day.
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
"We can forecast over the next 100 years pretty accurately -- we know when the power's coming," he said. The plan is for the stands for the turbines to be lined up 525 feet (160m) apart and weighted to the sea bed with scrap metal. With a depth of 130ft (40m), Pearson says that vessels would have a clearance of about 8m, plenty, he says, for the small craft that ply the four mile region. "These are really cut down versions of wind turbines, such that most of the electrical equipment is onshore so that if something goes wrong, we can get a Land Rover and drive to the substation rather than having to get a boat and pick them up. "That's one of the core advantages of this technology." Other issues such as maintenance and corrosion have been solved, in large part, by using the advances in other technologies. "It makes use of a large knowledge base, for example the seals and solutions have been solved by propeller technologies on ships, problems of corrosion are well known from subsea structures like bridges or oil rigs.
"What you're seeing is nothing brand new, it's just a lot of components coming together and I think that's the beauty of it."
Safe for sea life? Concerns over the impact on marine life were also raised during the planning process, but Pearson said the simple fact is the turbines move so slowly -- at between 12-18 RPM -- that experts believe most sea life would be able to either ignore or get out of the way of the blades with ease. "We've been working closely with institutions such as Scottish Natural Heritage and the Royal Society for the Protection of Birds because we have diving birds in the area," Pearson said. "We have seals, we have whales, we have dolphins -- it's beautiful up there." He said undersea monitors have been logging the wildlife in the region over the past five years and that various groups now have a clear baseline of which animals populate it. "There has been a lot of work done in other parts of the world on how seals and whales interact with these turbines and they do actually get a bit curious. "But these rotations of the blades are quite slow in comparison with wind turbines and the theory is that they can just get out of the way. He said research had shown that most marine life avoids tidal surges when they are in full flow. "I can imagine seals dancing around them, but the only time they'll be playing around them is when the flow is benign -- and that only lasts for about an hour and a half and at that time the blades aren't rotating. "We don't want to be blasĂŠ about it, but at the same time we have a high degree of confidence." The immediate future of the energy source, he said, was looking good, with leases around Scotland showing the potential to produce 1.2GW -- more than twice the energy produced by an average-sized nuclear power plant. "The UK has a good chance to develop and manufacture these turbines for world consumption in a beautiful part of the world which currently has a low GDP," he said.
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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PBE NEWS BRIEFS Watching the basin
U.S. oil drillers cut rigs, scaling back in Permian The number of rigs drilling for oil in the United States fell by 29 in mid-December, the biggest weekly drop in two years, as tumbling crude prices continued to threaten energy company revenues. The oil rig count dropped to 1,546 in the week to Dec. 12, according to data from oil services firm Baker Hughes on Friday. The number of oil rigs has declined in six of the last nine weeks since hitting a record high of 1,609 in mid October, as a nearly 50 percent drop in oil prices since the summer begins to take its toll on drilling projects. Energy traders have been watching rig data to see if the steep price drop has begun to prompt oil drillers to cut back on the number of rigs. Some analysts cautioned about making too much of just one week's drop; the number remains up more than 100 from a year ago, when there were 1,411 rigs seeking oil.
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Twenty-one of the 29 rigs that were cut were in the Permian Basin, the fastest growing and largest U.S. shale play in West Texas and New Mexico. Analysts said that drilling there is costlier due to the geological complexity of the play, particularly when compared with the Eagle Ford formation in South Texas. Less efficient vertical rigs fell by 24 to a total of 330, the lowest since 1999, according to the Baker Hughes data. The horizontal rig count, most often used to extract oil from shale rock, fell one this week to 1,367. Horizontal rigs peaked at 1,372 in late November. "Vertical rigs are less efficient and more on the margins than horizontal rigs, so it certainly makes economic sense that if indeed this decline was a rapid response to the crude price drop then those are the ones that are going to come off," said Kyle Cooper at IAF Advisors, a consultancy, in Houston. U.S. oil and gas producers are scaling back capital spending plans for 2015. Source: Reuters
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Watching THE SHALE
Norway's Statoil to reduce stake in U.S. shale formation Statoil has sold part of its stake in a shale field in the northeast of the United States to Southwestern Energy for $394 million, the Norwegian energy firm said in late December.
"The proceeds from this deal represent approximately one crown per Statoil share and helps it maintain its dividend for the next quarter, but not much more than that," ABG Sundal Collier analyst John Olaisen said.
Like its rivals, Statoil is stepping up efforts to sell assets and preserve cash as the industry faces a slump in the oil price, which has fallen by around a half since June.
Southwestern Energy closed an additional acquisition of oil and gas assets in the Marcellus and Utica shale fields in a $4.98 billion transaction with Chesapeake Energy Corp , the second-largest U.S. producer of natural gas. .
Shale oil is typically more expensive to produce than conventional oil. Statoil said it had agreed to reduce its stake in the U.S. Southern Marcellus onshore asset to 23 percent from 29 percent. The Norwegian firm has stakes in 615,500 acres of the formation, of which 91,400 are operated by Statoil. The stake it sold is not operated by Statoil.
"The price is in line with what Southwestern paid in the Chesapeake deal. If Statoil could get the same price per acre for its entire stake in Marcellus, then that would be a very very good price," Olaisen said. Statoil's third-quarter production from the Marcellus play amounted to 130,500 barrels of oil equivalent per day, of which around 4,000 barrels came from the assets included in the transaction. ($1 = 6.0784 Danish crowns) Source: Reuters
Photo courtesy of www.subseaworldnews.com JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Watching the STATE
Texas lawmakers put new gun rights laws in their sights Several proposed new gun laws await the new Texas legislature when it opens this month, including one to allow open carrying of handguns in public and another providing a sales tax holiday for firearms purchases. The Republican-dominated legislature will become even more conservative due the party's landslide win in the November election, with many members pledging to expanding firearms rights in the state often seen as an incubator of conservative policies nationwide. Proposed measures would ban cities and counties from restricting gun rights and try to have any new federally imposed restrictions on firearms declared illegal in Texas. Lawmakers are also looking to prohibit schools from punishing students who fashion their breakfast pastries into the shape of a gun. "We have so many gun bills that have been filed that we can't have anything but an open carry law passed next year," said C.J. Grisham, founder of the activist group Open Carry Texas. The group has been pushing for the unlicensed open carrying of handguns, pointing to laws in Texas and
elsewhere that allow for the unlicensed open carrying of long guns such as rifles. Current Texas law grants citizens the right to carry concealed handguns with a permit. An open carry measure seems likely with nine pieces of legislation up for consideration and Governor-elect Greg Abbott, a Republican who takes office in January, saying he supports the move. There has been some push back after members of Open Carry Tarrant County were criticized for endangering public safety by staging rallies this year where armed members took to streets, stores and restaurants seeking support for their cause. In response to a wave of school shootings across the United States, some conservative Texas lawmakers advocate measures that would make it easier for teachers and administrators to carry weapons, arguing that this is a way to prevent violence. A so-called "Pop-Tart bill" to bar punishment for children who make firearms inferences has attracted much attention. It was inspired by the case of a Maryland school that suspended a secondgrader for chewing a breakfast pastry into the shape of a gun. "The bill is a proactive effort to prevent even the chance of a Texas student losing valuable instruction time due to an act of non-disruptive, non-threatening behavior by a child," said State Representative Ryan Guillen, a Democrat sponsoring the bill. Source: Reuters
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Watching the GOVERNMENT
UK lawmakers will ask U.S. for secret parts of CIA report, to scrutinize UK spies A powerful British parliamentary committee will ask the United States to hand over blacked out parts of a report into the CIA, to try to establish whether British spies were complicit in torture or rendition, its chairman said in December. If parliament's Intelligence and Security Committee (ISC) saw evidence of such behavior, it could summon politicians from the left-leaning Labour party such as former prime minister Tony Blair who were in power at the time of the allegations. "If British intelligence officials were present when people were being tortured then they were complicit in that torture," Sir Malcolm Rifkind, the ISC's chair and a former foreign secretary, said. "That would be quite against all the standards of this country. It would be something that ought to be brought into the public domain," Rifkind told the BBC's Andrew Marr Show. A report released by the U.S. Senate Intelligence Committee found that the CIA had misled the White House and the public about its torture of detainees after the Sept. 11 attacks and had acted more brutally than thought. Its publication has already raised uncomfortable questions in Poland and other countries identified as being involved in the program about how much their leaders knew.
But the heads of MI5 and MI6 have repeatedly said they would never use torture to gain information, and ministers have also denied knowledge of sending suspects to face torture abroad. However, a Libyan dissident asserts he and his pregnant wife were kidnapped by U.S. forces in 2004 with the help of MI6 and handed over to Muammar Gaddafi’s government, which tortured him. A Pakistani man also says he was waterboarded by British special forces in Iraq in 2004, and a former Labour security minister says there may have been "the odd case" when British spies knew of U.S. torture. Rifkind said his committee would be asking both the U.S. Senate and the U.S. government to give it access to the relevant parts of the report into the CIA as part of its own inquiry into the work of Britain's intelligence services. If necessary, he said the committee would summon spies and current and former ministers to learn the truth. He said he hoped his committee's report into the matter would be ready next year. Source: Reuters
The British government said it had asked the United States, a close ally, to keep parts of the report referring to UK intelligence activity secret on national security grounds. It insisted it was not covering up anything embarrassing. Britain's foreign and domestic security services, known as MI6 and MI5, have for years been accused of colluding in the ill-treatment of suspected militants. JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Watching the Nation
Several states are adding or increasing incentives for electric vehicle charging stations During the past few years, several models of plugin electric vehicles (PEVs), including battery electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), have been introduced in the light-duty vehicle market. PEVs are limited by driving range, which is related to battery capacity, and can usually travel between 60 and 200 miles before recharging. Therefore, charging infrastructure is crucial to the success of these kinds of vehicles. To address this issue, states have established plans to promote the development of infrastructure through financial incentives for the building of new public and private recharging facilities.
through April 2014, PEV drivers recharged 17,917 times in Washington and 18,522 times in Oregon, mostly using fast chargers. Total kilowatt hours consumed were also similar: 154,881 in Washington and 153,256 in Oregon.
In 2008, Washington and Oregon established plans to facilitate PEV travel by installing recharging stations at convenient intervals on major travel corridors, including along Interstate 5 (I-5), the main north-south highway that runs from Canada to Mexico. Each station contains one 480-volt direct current (DC) fast charger and one 240-volt Level 2 charger. Fast chargers take 15 to 30 minutes to charge a vehicle's battery, while Level 2 chargers take about 4 hours.
Several other states offer incentives for EV infrastructure: Maryland offers incentives for PEV recharging equipment: a tax credit of 20% of the cost, up to $400, and a rebate of 50% of the cost, up to $900 for individuals, $5,000 for businesses, and $7,500 for retail gas stations. The District of Columbia offers a tax credit of 50% of the cost of installing a charging station, up to $1,000 for residences and $10,000 for publicly accessible stations.
Fast chargers are now located every 25 to 50 miles along the 585 miles of I-5 running through Washington and Oregon, as well as along other major routes in these states. Oregon also offers a tax credit for the installation of charging stations, valued at 25% of the cost for residences and 35% for businesses. Washington and Oregon now have about 5% and 4%, respectively, of the nation's total public charging stations, despite having only about 2% and 1% of the nation's total light-duty vehicles. From March 2012
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California also plans to add charging stations along its length of I-5, extending what state governments have called the "West Coast Electric Highway" all the way to Mexico. At this point, California has focused its efforts on building charging infrastructure around its major cities. The state currently has more than one-fifth of the U.S. public charging stations.
Arizona offers a $75 tax credit for installing charging equipment. Louisiana offers a 50% tax credit for the cost of charging equipment. Missouri's tax credit covers 20% of the cost of installing fuelling station, up to $15,000 for individuals and $20,000 for businesses. New York's income tax credit of 50% of the cost of charging equipment covers up to $5,000. Oklahoma has a 75% tax credit for the cost of commercial charging infrastructure. Utah has made electricity used for vehicles exempt from taxes. In addition to infrastructure incentives, several states also promote PEV sales by allowing those vehicles in high-occupancy vehicle (HOV) lanes, regardless of the number of passengers in the vehicle. Hawaii allows PEV owners to drive in HOV lanes and exempts them from public parking fees. California, Florida, Georgia, Tennessee, and Utah also provide HOV access to PEV drivers. New Jersey, New York, and Virginia offer such privileges on a limited number of roads. Source: U.S. Energy Information Administration, based on Alternative Fuels Data Center
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Watching Offshore
Mexico limits shallow-water bids in oil sector opening Mexico said in December it would cap the number of shallow-water projects companies can bid for as it set out initial contracts for the historic opening of its oil and gas industry, but did not specify the share the government will take. Following a reform that ended Mexico's 75-year state monopoly, officials unveiled details of the first production-sharing contracts to an audience that included executives from Chevron Corp and Exxon Mobil Corp . The contracts are for 14 shallow-water exploration and production (E&P) blocks that will pay winning companies with a share of the output from projects, which the government estimated would cost $20 per barrel on average to produce. "For the first time, we're setting in motion public tenders in which both national and international companies can explore for, and eventually extract, fossil fuel resources in shallow waters," said Energy Minister Pedro Joaquin Coldwell. Nine-tenths of the formula used to award the 25-year contracts will depend on the share of operating profits a company offers the government, with the rest dictated by how much investment a company pledges. Companies or consortia will be limited to bidding on up to five shallow-water areas, and will have to show
a track record in offshore projects. No company can join more than one consortium in the first round, the government said. Fabio Ortega, the top executive in Mexico for Colombia's publicly traded, state-controlled oil company Ecopetrol SA , said the limits are not standard practice. "We'll have to see how much of an impact these limits create," he said, adding the bidding terms were otherwise in line with international standards, and that Ecopetrol is interested in the entire package. Juan Carlos Zepeda, head of the regulator that manages the process, the National Hydrocarbons Commission, said the limits are geared towards promoting competition among companies. Those seeking to participate in the tenders must have operated at least one offshore E&P project or have investments in them worth at least $1 billion. Prospective bidders must also have either operated at least one offshore E&P project or been a partner in at least two within the last five years. The government, which hopes its reform will reverse a 30 percent slide in crude output over the past decade, said companies can recover up to 60 percent of their production costs provided they make a commercial discovery. Source: Reuters
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Watching the WORLD
China, Kazakhstan to sign $10 billion in deals including oil, infrastructure: Xinhua China is expected to sign 30 cooperative agreements worth $10 billion with Kazakhstan as Premier Li Keqiang begins his first official visit to the country, the official Xinhua news agency said in late December.
Kazakhstan has become China's second largest trade partner in the Commonwealth of the Independent States, while China is the second largest trade partner and the largest export market of Kazakhstan, Li was quoted as saying.
Xinhua did not give details, but quoted Chinese Vice Foreign Minister Cheng Guoping as highlighting a joint-venture logistics base and urging interconnectivity with highways, railways, ports, air routes, oil and gas pipelines.
Li will also visit Serbia and Thailand, but some of the most touchy topics he could encounter are off the agenda, including the fate of Muslims from western China who have fled to Southeast Asia.
"The Sino-Kazakh cooperation is developing rapidly. The volume of trade between the two countries is increasing annually by 20 percent," Xinhua quoted Li as saying in an article.
Li's December trip also takes in summits with Eastern European, Central Asian and Southeast Asian leaders.
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Source: Reuters
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JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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RESTAURANT
BITES
The Jazz Café
A new café brings burgers, steaks and all that Jazz to Monahans Kathy Fausett admits that aside from a bunch of sand, there’s not a whole lot to look at in Monahans Texas. There also wasn’t a whole lot of variety in dining options, at least not until a year ago. What started out as a little family project almost 10 years ago finally came to fruition in September of 2013, when John and Kathy Fausett opened up The Jazz Café inside the old Tower Movie Theatre. From the outside, it doesn’t appear to be anything special, but Kathy says customers tell her all the time that they feel as though they’ve been transported to a big city the moment they walk through the doors of the renovated 1930’s theater. A chiropractor and RN by trade, John and Kathy didn’t know anything about the restaurant business when they set out on this journey back in 2005, but they were determined to create a unique and fun dining experience for their community to enjoy. Kathy says her husband had always wanted to open up a restaurant because he appreciated the energy and atmosphere of bringing people together for a good meal. When they bought the old movie theatre in 2005, they had no design plans for what they were going to do with 42
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
by Marcy Madrid
it, rather Kathy says they just decided to let the building speak to them. And speak to them it did, for almost 8 years, as the family worked on renovating the historic building phase by phase and bit by bit. The Fausett’s also started polling locals about what they wanted out of a restaurant and what types of food they typically traveled out of town to eat. As for the Jazz part, well, Kathy says that’s her husband’s touch as he loves Jazz music. You can even find live musicians at The Jazz Café on select Saturday nights playing a saxophone or the old 1887 grand piano they refurbished during the
renovation. Kathy says it’s been a fast and furious ride ever since they opened last year and they not only get lots of oilfield travelers but their little oasis in Monahans has also attracted people from nearby towns like Pecos and Kermit. The menu has a wide variety of options to suit your taste buds from burgers and steaks to pastas and fish. Although Kathy says they have brought in professional chefs to incorporate some unique offerings and culture into their menu, the most popular item still remains a West Texas staple: Chicken Fried Steak.
Kathy says although they didn’t start out with a defined mission statement, they did recently develop one that has helped keep all their employees eyes on the same goal: To Provide a Nourishing Environment that Brings People Together.
The Jazz Café 214 West Sealy Monahans, Texas 79756 (432) 943-2494 M - F. 11 am -2 pm, 5-9 pm • Sat. 5-9 pm
www.monahansjazzcafe.com Find us on Facebook at The Jazz Café JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Rules of Engagement on Race by Daniel Stephens
Daniel Stephens is the Senior Pastor of Mid-Cities Community Church, since 2006. He is the honored husband to Kayla Stephens, a proud father of twin sons Jonah & Jude, daughter Kampbell and youngest daughter Karis Anna.
Talking about issues of race and justice is, as evidenced by recent activities, something that is needed in our country. Set aside for a moment the details of the real or perceived injustice in the specific case of Michael Brown of Ferguson, MO. The reaction to the real or perceived injustice reveals an undercurrent of issues that have gone unaddressed for too long. As a parent, I am reminded of moments when my kids will cry and act out because of an injustice they have suffered from their siblings. While the injustice may be legitimate, their intense reaction usually reveals something deeper going on. Possibly they have built up anger, frustration, or have not felt understood or listened to for quite some time. I have discovered that the best thing to do in those situations is to sit down with them and get to the root of what is going on in their hearts. In no way do I intend to minimize what happened to Mr. Brown, but the heart of my illustration is that there is something bigger and deeper that can be accomplished in the wake of Ferguson.
1. Words can destroy or heal. Proverbs 12:18 says “the words of the reckless pierce like swords, but the tongue of the wise brings healing”. Proverbs 16:24 says “gracious words are a honeycomb,
I’ve been around long enough and have helped enough troubled marriages to know that reconciliation never comes by ignoring the real problems. Reconciliation only comes when there can be open, honest, respectful conversation with the intent to bring healing not division. When engaging in this conversation, which I think is needed, it's important to remember a few things: 44
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
sweet to the soul and healing to the bones”. James 1:26 reminds us if anyone thinks he is religious and does not bridle his tongue deceives himself and his religion is worthless. Choose words that bring life and healing. They can be honest words but said with respect towards one another and with a heart to seek understanding. 2. Consider others better than your self. Philippians 2:3 says “do nothing from rivalry or conceit, but in humility count others more significant than yourselves.” This is disarming when dealing with difficult issues and…it's biblical. It’s also really hard to do when engaging in conversations you are fully vested in. This isn’t about ceding what you believe is true; it’s more about your attitude towards others and yourself. Recognizing your own blind spots goes a long way! 3. Listen. Proverbs 18:13 states that "to answer before listening is folly and shame". Seek to understand where people are coming from. Put on their shoes & walk around before you make a judgment. 4. Let scripture inform your thoughts on this important topic. If you have spent more time allowing FOX or MSNBC form your
opinion on these important issues than you have searching what scripture says, you need to repent and open your Bible. What does Jesus say about treating others? What does Jesus say about the condition of our hearts? What's the role of government & the law? How is wisdom and understanding obtained? What can we do or say to be ministers of reconciliation and redemption in our culture? 5. Pray. Pray for peace. Pray for justice. Pray for our nation and the conversation of race and justice. Pray for the Brown family. Pray for law enforcement. Pray for wisdom and understanding in the conversation. Pray that God would use YOU to bring healing not division. It may be easier to be silent, hoping the issue goes away, but it’s not always better. Silence won’t bring healing or reconciliation, nor does silence ever get to the heart of the issue. People who genuinely care and are willing to take the wisdom of Scripture seriously can help us move forward. My prayer is that you and I would be those people. Follow Daniel on Twitter: @DanielBstephens
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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U.S. RIG COUNT - TEXAS States &
through January 3, 2015
BAKER HUGHES RIG COUNT
RIGDATA RIG COUNT
Four Week Average 2013
Four Week Average 2014
Last Week
This Week
Four Week Average 2013
Four Week Average 2014
Last Week
This Week
Waiting to Spud
Texas RRC District 1
135
122
122
121
133
120
118
120
14
Texas RRC District 2
81
85
85
86
79
90
89
94
5
Texas RRC District 3
57
65
65
63
58
75
76
71
3
Texas RRC District 4
35
21
21
19
22
24
22
22
1
Texas RRC District 5
10
9
9
9
8
10
8
9
0
Texas RRC District 6
27
34
34
32
30
35
36
34
1
Texas RRC District 7B
13
10
9
6
19
15
14
10
2
Texas RRC District 7C
79
99
96
96
86
103
102
100
3
Texas RRC District 8
280
322
318
317
267
320
314
321
10
Texas RRC District 8A
39
30
27
28
38
34
36
35
1
Texas RRC District 9
21
18
19
16
34
22
20
19
1
Texas RRC District 10
65
62
62
58
67
64
61
60
0
Texas Total
842
877
867
851
841
912
896
895
41
U.S. Totals
1,775
1,896
1,979
2,109
2,079
2,043
61
Districts
1,875 1,840
COPYRIGHT Š 2014 RIGDATA P.O. Box 820547 Fort Worth Texas 76182-0547 1-800-627-9785 | www.rigdata.com 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. 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 | JANUARY 2015
Top 35 Drillers Rankings Each month we track the activity of all the drillers and compile the results into a report that identifies the top 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 35 out of 100. through December 31, 2014 Company
Footage Drilled
% of Total
Average Footage
Well Starts
% of Total
Directional Wells
1
Helmerich & Payne, Inc.
60,081,286
17.9%
10,723
5,603
13.7%
5,105
2
Patterson-UTI Drilling Company, LLC
35,908,486
10.7%
10,888
3,298
8.1%
3,014
3
Nabors Industries, Ltd.
31,220,032
9.3%
8,305
3,759
9.2%
3,403
4
Chesapeake Energy Corporation
14,408,353
4.3%
9,889
1,457
3.6%
1,457
5
Precision Drilling Trust
13,808,677
4.1%
9,163
1,507
3.7%
1,435
6
Ensign Energy Services, Inc.
12,693,299
3.8%
6,424
1,976
4.8%
1,163
7
Unit Corporation
11,009,459
3.3%
10,213
1,078
2.6%
1,017
8
Pioneer Energy Services Corp.
9,413,543
2.8%
10,553
892
2.2%
683
9
Trinidad Energy Services Income Trust
8,000,821
2.4%
9,663
828
2.0%
668
10
Cactus Drilling Company, LLC
6,673,135
2.0%
10,298
648
1.6%
639
11
Oil States International, Inc.
6,536,044
1.9%
6,255
1,045
2.6%
269
12
Sidewinder Drilling, Inc.
4,843,364
1.4%
9,070
534
1.3%
497
13
Xtreme Drilling and Coil Services Corp.
4,837,132
1.4%
11,069
437
1.1%
421
14
Savanna Energy Services Corp.
4,588,497
1.4%
8,944
513
1.3%
185
15
Cyclone Drilling, Inc.
3,559,713
1.1%
6,003
593
1.5%
573
16
Latshaw Drilling & Exploration Company
3,371,728
1.0%
8,803
383
0.9%
381
17
Frontier Drilling, LLC
3,129,556
0.9%
9,071
345
0.8%
299
18
Superior Energy Services, Inc.
3,055,323
0.9%
9,952
307
0.8%
151
19
CanElson Drilling, Inc.
2,688,276
0.8%
9,113
295
0.7%
128
20
Robinson Drilling of Texas, Ltd.
2,643,561
0.8%
11,015
240
0.6%
8
21
SandRidge Energy, Inc.
2,568,982
0.8%
6,673
385
0.9%
143
22
SWN Drilling Company
2,354,576
0.7%
4,519
521
1.3%
520
23
Scandrill, Inc.
2,316,208
0.7%
11,698
198
0.5%
174
24
Orion Drilling Company, LLC
2,154,517
0.6%
11,221
192
0.5%
183
25
Precision Drilling (US) Corporation
2,152,245
0.6%
9,198
234
0.6%
149
26
Bison Drilling and Field Services, LLC
1,999,403
0.6%
11,831
169
0.4%
72
27
Lewis Energy Group, LP
1,926,400
0.6%
10,193
189
0.5%
188
28
Basic Energy Services, Inc.
1,891,253
0.6%
7,388
256
0.6%
70
29
Cade Drilling, LLC
1,884,702
0.6%
11,779
160
0.4%
158
30
SST Energy Corporation
1,833,713
0.5%
9,912
185
0.5%
178
31
Pinnergy, Ltd.
1,716,868
0.5%
9,132
188
0.5%
187
32
ProPetro Services Incorporated
1,704,600
0.5%
11,596
147
0.4%
0
33
Sendero Drilling Company, LLC
1,560,520
0.5%
11,227
139
0.3%
5
34
Big Dog Drilling
1,548,900
0.5%
11,824
131
0.3%
9
35
Murfin Drilling Company, Inc.
1,542,850
0.5%
4,718
327
0.8%
0
Total Top 100 for year 2014
335,708,653
100.0%
---
40,797
100.0%
---
RANK
JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
47
Top 35 Operators Rankings Updated every month, we track and rank the top
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.
through December 31, 2014
RANK
Company
Footage Drilled
% of Total
Average Footage
Well Starts
% of Total
Directional Wells
1
Anadarko Petroleum Corporation
15,295,660
4.6%
10,441
1,465
3.6%
1,455
2
Chesapeake Energy Corporation
13,877,624
4.1%
10,272
1,351
3.3%
1,351
3
Pioneer Natural Resources Company
10,465,095
3.1%
12,968
807
2.0%
605
4
EOG Resources, Inc.
10,438,147
3.1%
10,522
992
2.4%
953
5
Occidental Petroleum Corporation
9,784,581
2.9%
6,216
1,574
3.9%
862
6
Apache Corporation
9,137,491
2.7%
9,083
1,006
2.5%
712
7
Marathon Oil Corporation
8,408,052
2.5%
15,315
549
1.3%
548
8
ConocoPhillips Company
7,009,027
2.1%
10,158
690
1.7%
595
9
BHP Billiton Limited
6,487,647
1.9%
13,804
470
1.2%
469
10
Devon Energy Corporation
6,270,900
1.9%
9,360
670
1.6%
627
11
QEP Resources, Inc.
5,927,734
1.8%
11,832
501
1.2%
448
12
Exxon Mobil Corporation
5,693,278
1.7%
6,404
889
2.2%
464
13
Chevron Corporation
5,431,141
1.6%
4,978
1,091
2.7%
475
14
Encana Corporation
5,101,519
1.5%
12,060
423
1.0%
410
15
Concho Resources, Inc.
4,534,121
1.4%
10,847
418
1.0%
312
16
Noble Energy, Inc.
4,524,252
1.3%
9,987
453
1.1%
450
17
Whiting Petroleum Corporation
4,396,208
1.3%
10,248
429
1.1%
386
18
Continental Resources, Inc.
4,381,952
1.3%
6,044
725
1.8%
725
19
Oasis Petroleum North America, LLC
4,146,375
1.2%
10,366
400
1.0%
400
20
Laredo Petroleum, Inc.
3,597,800
1.1%
11,278
319
0.8%
140
21
Southwestern Energy Company
3,493,460
1.0%
4,573
764
1.9%
760
22
Linn Energy, LLC
3,430,404
1.0%
5,661
606
1.5%
285
23
SandRidge Energy, Inc.
3,228,877
1.0%
5,364
602
1.5%
446
24
EP Energy E&P Company, LP
3,147,600
0.9%
9,775
322
0.8%
289
25
WPX Energy, Inc.
3,125,865
0.9%
7,303
428
1.0%
424
26
Antero Resources Corporation
2,986,775
0.9%
11,532
259
0.6%
259
27
Newfield Exploration Company
2,948,647
0.9%
6,971
423
1.0%
408
28
Murphy Oil Corporation
2,748,140
0.8%
10,489
262
0.6%
262
29
CrownQuest Operating, LLC
2,710,300
0.8%
11,940
227
0.6%
0
30
Ultra Petroleum Corp.
2,672,625
0.8%
12,039
222
0.5%
222
31
Penn Virginia Corporation
2,463,000
0.7%
14,488
170
0.4%
170
32
Hess Bakken Investments II, LLC
2,438,307
0.7%
5,618
434
1.1%
432
33
Cimarex Energy Co.
2,199,087
0.7%
10,472
210
0.5%
203
34
Energen Resources Corporation
2,151,362
0.6%
9,960
216
0.5%
149
35
SM Energy Company
2,052,340
0.6%
9,681
212
0.5%
212
Total Top 100 for year 2014
335,708,653
100.0%
---
40,797
100.0%
---
48
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | JANUARY 2015
Source: www.eia.gov
Lower crude oil prices further reduce expected spending on heating oil this winter In its December Short-Term Energy Outlook (STEO), EIA expects that average heating oil expenditures by households that use oil as their primary heating fuel during the 2014-15 winter will be 27% ($632) below last winter's expenditures. Heating oil prices have declined with crude oil prices, and EIA expects U.S. heating oil prices to average $3.09 per gallon (gal) this winter, 20% lower than last winter, and 15% lower than expected in the October Winter Fuels Outlook (Table 1).
Data from the National Weather Service show that November 2014 was 18% colder than the 10-year average for the entire United States. Colder weather typically translates into increased consumption of heating fuels and higher space heating expenditures. However, because the National Weather Service still expects the balance of the winter to be milder than last year, with temperatures ranging from 11% to 16% warmer for the Northeast (PADDs 1A and 1B), Midwest, and South, total consumption is not expected to be higher.
between EIA's October and December STEOs is tied to lower crude oil prices. Monthly average Brent crude oil prices have declined 29% from their 2014 high of $112 per barrel (bbl) in June to an average of $79/bbl in November. EIA expects Brent prices to average $78/ bbl in the fourth quarter this year, compared to $109/bbl for the same time last year. In the October STEO, Brent prices were expected to average $98/bbl in fourthquarter 2014. The $20/bbl downward revision to crude oil prices causes lower prices for petroleum products which are used as heating fuels, mainly heating oil. Total distillate inventories in the Northeast, although well below the five-year average, are in line with inventory levels in recent years (Figure 1). In general, the global supply-demand balance for distillate fuels has created a price structure in the futures market that does not encourage building inventory even in advance of the increased demand in the winter months. Although relatively low inventory levels can contribute to price volatility, the Northeast is located in the actively traded Atlantic Basin market from which distillate fuel is imported during periods of high demand.
In EIA's October Winter Fuels Outlook, heating oil consumption in the Northeast was expected to average 10% less than last year. In the December STEO, Northeast heating oil consumption was revised slightly higher, but will still average 8% lower than last winter. The decline in expected expenditures for heating oil JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
49
Consumption of heating oil for space heating is concentrated in the Northeast, where about 24% of households depend on the fuel, compared to only 5% of households nationwide. However, the expectation of reduced expenditures compared to last winter generally holds true for other fuels and regions, but does vary. About one-half of U.S. households use natural gas as their primary heating fuel, and EIA currently expects households heating with natural gas to spend an average of $31 (5%) less this winter than last winter. An additional 39% of U.S. homes rely primarily on electricity as their primary heating fuel, and those expenditures are expected to be about the same as last year. Roughly 5% of U.S. households use propane for space heating, and expenditures are expected to be 20% lower than last year in the Northeast and 33% lower in the Midwest. The outlook for average household winter heating fuel expenditures discussed above provide a broad guide to changes compared with last winter. However, fuel expenditures for each individual household are highly dependent on local weather conditions, market size, the size and energy efficiency of individual homes and their heating equipment, and thermostat settings.
U.S. AVERAGE GASOLINE AND DIESEL FUEL PRICES DECREASE SIGNIFICANTLY ON LOWER OIL PRICES The U.S. average price for regular gasoline as of December 15, 2014, was $2.55 per gallon, down 13 cents from the previous week, and 69 cents lower than the same time last year. Prices in all regions of the country declined, with the largest drop in the Midwest, where prices fell 17 cents to $2.42 per gallon.
The U.S. average diesel fuel price declined 12 cents this week to $3.42 per gallon, 45 cents lower than the same time last year. Prices in all regions declined, led by the Midwest and Rocky Mountains, where prices fell 15 cents to average $3.47 and $3.50 per gallon, respectively. West Coast prices fell 12 cents to average $3.47 per gallon, while prices on the Gulf Coast fell 11 cents to average $3.33 per gallon. Prices on the East Coast declined eight cents per gallon to average $3.39, putting prices 53 cents below the same time last year, the widest decline of any region.
PROPANE INVENTORIES FALL U.S. propane stocks decreased by 0.8 million barrels last week to 78.4 million barrels as of December 12, 2014, 28.4 million barrels (56.9%) higher than a year ago. Gulf Coast inventories decreased by 0.9 million barrels and East Coast inventories decreased by 0.2 million barrels. Rocky Mountain/West Coast inventories decreased by 0.1 million barrels, while Midwest inventories increased by 0.4 million barrels. Propylene non-fuel-use inventories represented 4.2% of total propane inventories.
RESIDENTIAL FUEL PRICES DECREASE As of December 15, 2014, residential heating oil prices averaged $3.14 per gallon, almost 8 cents per gallon lower than last week, and 81 cents less than last year’s price for the same week. Wholesale heating oil prices averaged $2.16 per gallon, over 10 cents per gallon lower than last week and 91 cents lower when compared to the same time last year. Residential propane prices averaged $2.38 per gallon, less than 1 cent per gallon lower than last week, and almost 33 cents per gallon less than the price at the same time last year. The average wholesale propane price decreased nearly 7 cents this week to 67 cents per gallon, almost 97 cents per gallon lower than the December 16, 2013 price.
The Rocky Mountain average fell 15 cents to $2.59 per gallon, while the West Coast and Gulf Coast prices both fell 11 cents per gallon, to $2.83 and $2.33 per gallon, respectively. The East Coast price fell 10 cents to $2.64 per gallon. 50
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JANUARY 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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