Oilman Magazine May/June 2017 : simplebooklet.com

LETTER FROM THE PUBLISHER As you may know many of the shale markets are picking up momentum In Texas the Permian Basin is taking off and in the last three months had a huge amount of investment activity Several operators and private equity firms have exchanged billions in assets as the area surges back The rig count in the Eagle Ford Basin is also moving up as producers find ways to extract oil faster and less expensively from shale To top it off the largest oil and gas producer in the U S Exxon Mobil announced that it plans to turn to shale basins for growth While the U S is producing more oil and gas last November OPEC members decided to curtail oil production for six months to lower reserves in an effort to increase the price of oil The 14 member OPEC countries agreed to cut oil production from 33 8 million barrels a day to 32 5 million barrels a day with hopes of non OPEC countries cutting 600 000 barrels a day The goal is to trim output by 1 8 million barrels a day in total To some extent this practice has worked At the time WTI oil prices were trading at 48 97 a barrel as of this writing oil is trading at 52 25 a barrel Recently some of the biggest OPEC producers announced they d like to push crude prices to 60 a barrel signaling they ll support an additional production cut of six months at the next OPEC meeting May 25 Our feature in this edition dives into how the Federal Energy Regulatory Commission operates FERC is charged with regulating and monitoring energy and overseeing the transportation of oil by pipeline as it relates to interstate commerce FERC also issues permits to build interstate natural gas pipelines and storage projects and reviews proposals for LNG terminals Be sure to check it out as our new managing editor Sam Cook navigates through FERC s proposal and permitting process Emmanuel Sullivan Publisher OILMAN Magazine Don Briggs Mark A Stansberry Mark A Stansberry Chairman of The GTD Group is an award winning author columnist film producer radio talk show host and 2009 Western Oklahoma Hall of Fame inductee He has been involved in the oil and gas industry for over 39 years He is currently serving as Chairman of the Board of the Gaylord Pickens Museum Oklahoma Hall of Fame Vice Chairman of the Board of Regents of the Regional University System of Oklahoma Board of Directors of OKC Port Authority Board of Governors of the Recording Academy Grammys Texas Chapter Lifetime Trustee of Oklahoma Christian University and Board Emeritus of the Oklahoma Governor s International Team He has served on several private and public corporate boards Jason Spiess Jason Spiess is an award winning journalist talk show host publisher and executive producer Spiess has worked in both the radio and print industry for over 20 years All but three years of his professional experience Spiess was involved in the overall operations of the business as a principal partner Spiess is a North Dakota native Fargo North Alumni and graduate of North Dakota State University Spiess moved to the oil patch in 2012 living and operating a food truck in the parking lot of Mac s Hardware In addition to running a food truck Spiess hosted a daily energy lifestyle radio show from the Rolling Stove food truck The show was one of a kind in the Bakken oil fields with diverse guest ranging from U S Senator Mike Enzi WY to the traveling roadside merchant selling flags to the local high school football coach talking about this week s big game 2 MAY JUNE 2017 PUBLISHED BY Oilman Magazine LLC P O Box 771872 Houston TX 77215 800 562 2340 OilmanMagazine com PUBLISHER Emmanuel Sullivan publisher OilmanMagazine com 800 562 2340 Ex 5 EDITOR Samuel Cook DIGITAL CONTENT MANAGER Tim McNally CONTRIBUTORS Biographies Don Briggs is the President of the Louisiana Oil and Gas Association The Louisiana Oil Gas Association known before 2006 as LIOGA was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana this representation includes exploration production and oilfield services Our primary goal is to provide our industry with a working environment that will enhance the industry LOGA services its membership by creating incentives for Louisiana s oil gas industry warding off tax increases changing existing burdensome regulations and educating the public and government of the importance of the oil and gas industry in the state of Louisiana MAGAZINE Joshua Robbins At Beachwood Marketing Group our mission is to market oil and natural gas properties in the most cost effective and efficient way We strive to provide excellent leadership and unparalleled service for each of our clients Josh has been instrumental in defining Beachwood s market leading solutions and has overseen the company s expediential growth Josh is also an accomplished writer on the acquisition and divestment market and a speaker and presenter at conferences He continues to keep his focus on the strategic direction of Beachwood Marketing Group and its expansion into new markets Eric R Eissler Eric is the former editor in chief of Oil Gas Engineering magazine and previous to that worked as an editor for Dubai based The Oil Gas Year magazine He is currently an administrator at Northwestern University in the McCormick School of Engineering Joseph DeWoody Joseph P DeWoody jpdewoody is the president of Clear Fork Royalty an oil and gas royalty investment company located in Fort Worth Texas Clear Fork Royalty works with accredited investors trusts and family offices to provide portfolio access to oil and gas mineral rights and royalties to hold for long term investment through various direct investment vehicles Joseph was selected by Oil and Gas Investor Magazine as a winner of the Top 20 under 40 Award and by TIPRO and Texas Monthly Magazine as a Texas Top Producer Joseph is a member of the Young Presidents Organization YPO He was appointed by Texas Governor Rick Perry to a six year term on the Texas Board of Professional Geoscientists He serves on the Board of Directors for the National Stripper Well Association and the Texas Alliance of Energy Producers Steve Burnett I was raised in a small West Texas town where the school mascot is a roughneck Growing up with a roughneck as the town symbol how could I not spend most of my adult life working in the petroleum industry I started working in the oilfields age 16 In Texas you had to be 17 with a signed minors release from your parents but my parents were glad to keep me working I had been working since my first job working on a commercial elephant garlic farm at age 12 By the time I reached 16 I had enough work experience to prove I knew how to hold my own on a work crew Anybody whose parents survived the great depression can attest to the fact that their children learn the value of a solid work ethic Oilman Magazine May June 2017 OilmanMagazine com GRAPHIC DESIGNER Kim Fischer CONTRIBUTORS Don Briggs LOGA President Mark Stansberry Chairman of The GTD Group Joseph DeWoody President of Clear Fork Royalty Steve Burnett CrudeOilCalendars com Story Sloane III The Sloane Gallery Houston Texas 281 496 2212 Eric R Eissler Administrator at Northwestern University McCormick School of Engineering Jason Spiess TheCrudeLife com Joshua Robbins CEO of Beachwood Marketing SUBSCRIPTIONS OilmanMagazine com subscribe ADVERTISING 800 562 2340 Ex 1 advertising OilmanMagazine com OilmanAdvertising com Copyright 2017 by Oilman Magazine LLC All rights reserved Reproduction without permission is prohibited All information in this publication is gathered from sources considered to be reliable but the accuracy of the information cannot be guaranteed Image credits The Sloane Gallery Houston TX 123rf com

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OILMAN COLUMN Interview with Amit Mehta CEO and Founder of Moblize By Tim McNally Tim McNally What was your motivation for founding Moblize Amit Mehta The primary reason I started Moblize was that I saw that the oil and gas industry was extremely good at hardware innovation but rather poor at software innovation What I saw in Silicon Valley was that companies there come from nowhere and then they can create software that you and I cannot live without But in the oilfield barely twenty percent of the software being created was actually being used That was the whitespace that I saw as a big opportunity and I decided to attack that in a big way TM What sort of struggles did your company face during the inception phase AM The biggest challenge I encountered was really finding customers Software was unfortunately being seen primarily as a nice to have rather than a must have That was the number one hurdle when it came to trying to get customers H ow do you convince someone to use something when they don t know the product can add value TM How does the real time analysis of data help operators in the field AM A lot of clients in the field had been used to making gut based decisions First the question is why do you make gut based decisions Because you do not have access to the entire context of the information Even if you have 6 some of the information there are a lot of unanswered questions regarding that information So what happens when you are trying to make a decision in that scenario is that you are going to end up speculating which can result in either underestimating risk or over exaggerating it You have to have access to facts not fiction A lot of people are not applying Big data in the right way We apply big data to make workers smarter versus trying to make the machines smarter In the field individuals need access to a variety of data Big data is not about volume it is about variety We say let s first figure out what decisions you want to make in the field in the office or wherever you are and based on that decision universe let s make sure you have all the data at your fingertips either through AI or through a combination of databases TM Do you plan on focusing solely on the oilfield or do you plan on moving into other industries AM My current goal is to maintain a laser focus in oil and gas and become a dominant player I think we are on track for that and that s why we have added a large number of customers in the worst market We have had pheromonal growth in the last 14 months in adding all these customers when the oil price was actually low So I think our goal is to capitalize on that growth in a big way TM Do you believe that the poor economic environment in the oilfield over these past two years contributed to your growth as they searched for new solutions to become more efficient Oilman Magazine May June 2017 OilmanMagazine com AM In a way I think that this oil crash turned out to be an absolute boon for Moblize because everybody was looking for ultra efficiency Amit Mehta Ultra efficiency doesn t only mean how can companies manufacture oil at these lower prices but it also means how can these companies do more with less All that really tied in well with what Moblize was doing because traditionally companies had to install big systems and hire consultants just for two or three years Some of our clients when we asked them why they chose us said that they can start with Moblize and start seeing value within 25 days so I think that was a big differentiator for us TM I understand you all recently had Ignite Summit Can you tell me a little bit about the event and how it went this year AM It was an absolute success We had 22 plus operators who came and there were zero vendors except Moblize because we were the organizer The entire focus was on case studies and there were a lot of discussions around how these companies should be elevating each other Everybody basically said that this was how a conference should be done and everybody said that they learned a lot because we didn t do any presentations on what Moblize could do for them It was a very intimate interaction between Moblize clients and non Moblize clients

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OILMAN COLUMN Envoc Brings Software Innovations to Inspections By Alaina Stuckey Based in Baton Rouge Envoc is one of Louisiana s fastest growing enterprise software design and development companies Envoc has recently emerged in the energy sector by developing a softwarebased solution to a long standing problem inspections performed with paper and pen Innovative solutions aren t always at a company s forefront Why Tradition Ease Budgets But while creative solutions may break tradition they increase efficiency revenue and scalability Innovation creates a better reality for a company and its customers and it s the core of Envoc The future is now when it comes to advanced software technology and its practical applications in everything around us says Ned Fasullo Envoc s chief strategy officer We intend to continue working with forward looking clients to make innovative solutions that achieve their business outcomes and we think doing so will ensure that Envoc is a major player on the national stage The founder of Envoc and the leader of its vision Calvin Fabre says it best when he describes the why of Envoc We exist at the intersection of creativity and technology to deliver excellent experiences and innovation With a collaborative agile process and cross functional teams we deliver a unique blend of design and development that creates an unmatched experience for your business Envoc is expanding at that intersection entering multiple industry sectors and international markets As a software development firm Envoc is the only Xamarin certified organization in Louisiana specializing in native mobile app development The company is also a Unity developer for 3 D applications and augmented reality platforms for the safety and industrial space During Envoc s deepening relationship with the industrial sector in 2015 the company realized a problem pattern among its clients Many inspection processes were conducted over a multiple step process with countless risk points Each time an inspection form changed the company had to reprint new forms to distribute to all inspectors In the field inspectors began their process with pen and paper taking pictures of equipment as needed Back at the office inspectors would have to upload attach and add notes to each picture according to the inspection they completed Only then was the inspection completed and ready for administrative signatures and reports Throughout this traditional process companies were left vulnerable to inspection mistakes due to poor handwriting and multiple data transfers Inspectors were consumed with editing their inspection forms rather than conducting new inspections There was also a lack of accountability to whether or not the inspectors physically conducted the inspection Companies continually lost valuable time and money in the traditional inspection process and Envoc changed that with the Spotter Inspection App Spotter is a tablet app and administrative web portal for companies in the oil and gas chemical marine and manufacturing industries The tablets are unique for these industries in that they work offline eliminating the need for consistent internet connection inside inspection facilities They are also certified as Class 1 Div 2 Intrinsically Safe With Spotter inspection processes are reduced to just three simple steps template creation inspection completion and report generation Within the Spotter web portal supervisors can easily create and update forms for the inspectors immediate use They can also monitor real time progress as inspectors are now able to conduct inspections in one seamless process capturing photos and videos within the app and submitting the form with the touch of a finger In turn inspection times are reduced by 87 percent and managers can keep their teams accountable through GPS capturing features Internally digital signature and routing capabilities reduce the need for manual handoffs and time consuming approvals Once an inspection is complete and approved it is stored in the web portal and always accessible for revisions and reporting Companies can now conduct more inspections with greater accuracy in less time thus leading to happier clients and increased revenue Nelson Carthel vice president of operations at CTS Inspection Services says Spotter brings big value to clients in terms of the expediency of reports and the reduction in labor hours Envoc intends to continue adding to that value Through extensive research and analysis Spotter will soon enter the next stage of its evolution It will be an exciting phase of updating and refining key features to create a better reality for companies all across the industry sector Oilman Magazine May June 2017 OilmanMagazine com 7

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OILMAN COLUMN Interview with former Russian Energy Minister Igor Yusufov 2001 2004 By Eric R Eissler Igor Yusufov was the Russian Energy Minister from 2001 2004 under President Vladimir Putin After his tenure as minister he served as Special Envoy of the Russian President for International Energy Cooperation and Ambassador at Large of the Russian Ministry of Foreign Affairs until late 2011 In 2011 he founded Fund Energy where he is currently serving as CEO The following interview with Mr Yusufov conducted over several email exchanges in March 2017 Mr Yusufov s responses have been preserved in their entirety What is Russia s Energy Plan for 2017 What are the strategic initiatives the country will take Every initiative in the Russian energy sector when we speak about strategic ones are rooted in the energy strategy the Government adapted in 2003 The preparation of this document has been one of the serious achievements of the time when I was Energy minister between 2001 and 2004 where this commodity is needed to sustain enhanced economic growth To be more specific China and other Asian countries where growth is expected to reach an annual 10 percent in the coming years But Europe could be among the destinations of enhanced Russian energy exports if forecasts of considerable economic growth are confirmed In accordance with this plan the share of the energy industry in the Russian GNP is decreasing due to development of other Russian industries and in 2017 is expected to surpass in 25 percent The share of hydrocarbons in the national export decreases too and is expected to be at 55 percent with oil production forecast of 548 551 million tons This amount will be dependent from the possible prolongation of OPEC and non OPEC crude production reduction adopted at the end of 2016 While recently we are seeing a slight drop in oil prices I am optimistic about the general impact of this OPEC deal move on international markets I would propose to prolong this deal and to enter into talks with the US in order to prevent the markets from collapse when large amounts of American shale hydrocarbons enter traditional markets As oil prices climb based on RussianSaudi agreements how does Russia prepare for the US shale industry to ramp up and start flooding the market again As for natural gas in 2017 Russia is expected to produce 640 650 billion cubic meters retaining its 17 18 percent share of global production Russia will be ready to cover all its needs and to increase exports to countries Drawing on the previous experience of the first ever crude production cut I negotiated in 2001 as Russian energy minister with fellow OPEC ministers indicates that even the fact that such talks could take place would 10 My expectation is that massive shale exports from the US will not have too much economic impact if oil prices fall dramatically This can be applied to both oil and gas Additionally there are certain technological restrictions such as lack of LNG liquefaction plants and associated infrastructure that allow for the export of LNG on shale gas exports and the additional cost for transportation to both commodities I assert there would be an extension of the dialogue between Russia and Saudi Arabia s agreement In the first stage the mutual interest could lead to the negotiation table with American representatives Oilman Magazine May June 2017 OilmanMagazine com calm down the markets and contribute to their mid term stability From only the energy perspective how does Russia want to work with the US How would the two countries ideally cooperate within the energy industry The general idea is that this is not merely a mutually beneficial Russian American dialogue in international markets stability which could bring the two energy superpowers to the idea of a closer cooperation Important oil and gas production projects have now been postponed due to sanctions But through special government programs of import substitution of corresponding equipment e g Arctic production can be produced in Russia Which means that American and European firms will not benefit from sanctions But with American technologies management skills and investments this way could be much shorter even shorter than in the case when Russia attracts partners from other countries Recalling high tech exploration and production projects in the Arctic the first association is that the partner of Rosneft was ExxonMobil I am sure the results of this 600 million unprecedented technological Continued on page 15

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OILMAN COLUMN Optimizing IT for 50 a Barrel of Oil By Lawrence Eribarne This is part 1 of a 4 part series on IT optimization in the oil and gas industry For parts 2 4 please visit our website OilmanMagazine com When business prospers IT departments often struggle to meet the demand for new capabilities To maximize limited resources most IT groups seek methods to collaboratively select and prioritize projects to ensure effective delivery to the business The result is an improved IT and business partnership coordinated decision making and a pace that often brings complexities and increases to the IT budget When revenues decline IT departments discover the new increases to maintenance and support are difficult to sustain As revenues begin to decline with oil prices IT is often asked to contribute to cost reductions with little regard for the new systems integrations and support required to continue delivery of services during the booming days The memory of improvements provided by key projects and the impact on IT maintenance costs are quickly forgotten in the haste to reduce budgets The IT leadership and business collaboration on how to improve the IT department s cost structure also disappears quickly as few people wish to help identify the best methods to reduce budgets Let s face it deciding how to invest money is much more gratifying than deciding how to reduce spending This often leads to irrational cost cutting behavior resulting from a lack of transparency impact analysis and coordination Many of the capabilities developed previously are impacted by a short term focus of immediate budget reductions Long term views of IT strategy architecture delivery and business alignment lose emphasis in the scramble to identify what is perceived as the lowest impact budget targets Meanwhile leaders work to limit the impact to their own areas of ownership driving costs down in ways that are not sustainable or simply shift costs out of IT and back into the business thereby eliminating value of the exercise When IT is working to support business competitiveness this type of gamification of the cost improvement process leads to failure Creating significant sustainable cost optimization requires a comprehensive approach that crosses all IT budget owners and maintains or improves business delivery Knowing where to focus when times are tough is just as important if not more so than focusing on the right activities when revenues are climbing Optimize IT Spend Cost cutting typically consists of a straight forward reduction target pursed by unguided individual budget owners within their areas of responsibility These targets are usually the same across the board as this simple method seems to advocate fairness and a distribution of accountability Everybody does their part and struggles equally with the burden What if one area is far more critical to current operations than another What if somebody has driven impactful efficiency programs for years What if one area has run far looser with available budget avoiding hard decisions resulting in more reduction opportunities While these questions may lurk beneath the surface they never seem to come to light perhaps even leading to dissention within the leadership How could all of us have the same target Unlike straight line cost reduction tactics IT Cost Optimization is a strategic approach which leverages collaborative processes and analytical models to improve IT value while supporting business alignment and optimizing service delivery requirements The focus is not on individual budgets and fair targets across the organization IT Cost Optimization provides a sustainable efficiency model across IT delivery and services allowing for various levels of impact to individual budgets Unlike cost cutting there is a heavy dependency on opportunities which extend across budgets requiring collaboration and transparency This can necessitate a shift in management maturity requiring skill development Leaders must change from a view of independent budget ownership and accountability to a view that encompasses an enterprise value focus The goal is cumulative efficiency and not a focus on any single area alone Once targets are identified analysis is conducted using a common approach and set of tools to ensure all opportunities are evaluated and selected fairly When cost reductions are driven from a need to keep a company profitable during low oil price periods the approach must be effective measurable and sustainable The key tenets of an IT cost optimization program include Quick Win Mid Term and LongTerm Focus IT Cost Optimization is a capability development that is permanently incorporated into ongoing IT performance management Cost metrics have a rightful place in every IT executive scorecard and dashboard regardless of business conditions When oil prices are down additional clarification of the levers and delivery impacts should occur This allows an immediate and balanced response to the environment which mitigates the prospective negative impact to the value chain Business Delivery Focus While IT groups quickly target easily obtained quick wins truly impactful cost targets which extend and compound over time are overlooked The periodic scramble to find ten or fifteen percent in a downturn distracts from a focus of driving down cost while improving business value year over year While many cost reductions begin within IT owned areas it inevitably requires interaction and perhaps even leadership from within the business before significant improvements are identified Target Maturity IT vendors and contracts are easy targets and should always be considered as part of the optimization picture However limiting the focus to these areas limits the ability to extend significant business value While pushing IT vendor savings is a logical start identifying large improvements through enhanced delivery models and innovation is the crucial goal Optimization KPI s The effectiveness of IT cost optimization cannot be measured within the silo of an IT budget alone Shifting the budget over a few periods can be insignificant compared to the overall cost optimization IT could drive within an organization over time IT optimization KPI s should focus on enterprise value goals Lawrence Eribarne is a Principal at Enaxis Consulting with over 20 years of experience as a technology leader performing IT organizational transformations as both an industry leader and IT advisor Lawrence has a cross industry background covering media technology military and a strong emphasis on energy and manufacturing Oilman Magazine May June 2017 OilmanMagazine com 11

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OILMAN COLUMN NATIONAL ENERGY TALK By Mark A Stansberry Chairman of the GTD Group Award winning author Energy Advocate What is National Energy Talk The History First the beginnings and history of National Energy Talk In 1992 I founded and launched the first International Energy Policy Conference Since its inception the conference has hosted dignitaries Fortune 500 companies industry experts ambassadors and delegations to discuss energy efficiency environmental preservation and the whys hows and solutions of a national energy plan The conference which originally launched in the Oklahoma City area has hosted events in Washington D C Houston Tulsa Denver and Dallas as well as other cities throughout the US National Energy Talk Present and Future We found for example that our Facebook wall America Needs America s Energy has a following likes of over 22 000 people across the US Three regional oil and gas associations in Texas Oklahoma and Kansas have a combined total of 2 100 followers likes on their Facebook pages Therefore this is an example of an area that National Energy Talk can complement the industry and be an active voice on social media With the launch of National Energy Talk NET what once was an annual conference has expanded into a mediadriven platform with year round engagement Today NET is helping lead a national dialogue on energy issues view and solutions through events publications video audio and online content NET believes in the power of people Nothing moves without energy NET is National National Energy Talk is a platform engaging a national dialogue on energy issues views and solutions We address the needs plans and issues that all types of energy face today Through discussion we can create a national energy vision Join the Talk The founding principle of NET remains steadfast the availability of reasonably priced energy is paramount to the economic and business development both in the United States and in other countries around the world Your involvement can help continue to bring about this change A National Energy Conversation in the Heartland National Energy Talk is excited to launch officially on May 1st 2017 Many thanks to Exploring Energy Radio Show for airing the announcement and to Oilman Magazine and GTR Newspapers for their great support through our columns The 2017 events will proceed as follows June July in Elk City Oklahoma which happens to be where I began my work experience in the oil and gas industry 40 years ago June 1st 1977 with an industry appreciation Bar B Que and keynote address and in Tulsa a higher education event and roundtable September Edmond Ok State and Federal Energy Dialogue Lecture and Roundtable and October Oklahoma City an awards ceremony with keynote speaker and roundtable Future Goals It is important that the message is national Mark A Stansberry in scope Therefore future goals include visits events in Detroit 2018 Washington D C 2019 and Houston 2020 Get Involved The website www nationalenergytalk com will launch this summer For more information Attn Mark Stansberry The Energy Advocates P O Box 5432 Edmond Ok 73083 405 715 1917 877 715 1917 Future generations are depending on us The time has come for all of us the people to take control of our energy future here in America Oilman Magazine May June 2017 OilmanMagazine com 13

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OILMAN COLUMN Safety Subcontracted to the Lowest Bidder By Eric R Eissler Worker s compensation is a double edged sword because it can be abused It is this exploitation that worker s comp has developed a stigma that makes most employer s cringe at the sound of the words The age old scenario goes an employee becomes injured on the job and must take time off to heal He becomes accustomed to not working and getting paid and then takes advantage of the situation After healing he is ready and able but not willing to return to work to collect worker s comp It s story that is all too infamous to business owners However worker s compensation does serve a purpose for people really in need High growth higher risk Oilfield work has a high associated risk and people do get severely hurt and sometimes die on the job Len Herk of NCCI Holdings wrote in a report that the rapidly expanding fracking industry has increased demand for skilled employees in oilfield service industries particularly well drilling and completion transportation and pipeline construction This may result in an increase in frequency of claims due to an influx of new and inexperienced workers In addition the scope of the work is inherently dangerous which may increase the severity of injuries Furthermore because drilling sites are often in remote locations quick access to medical facilities may be limited 1 Herk goes on to cite the rising amount of accidents and claims filed in North Dakota Texas and West Virginia which are all heavily involved in the oil and gas industry Of all the states listed North Dakota has the most troubling record North Dakota is comparable to the days of the wild west most drilling sites are new and there are always new wells to be discovered it s a prospector s paradise However with few regulations in place the lowest worker s compensation premiums in the country and an influx of sub contractors and inexperienced workers has led to the state being the leader in industry related deaths 14 accidents claims and delinquent premium payments 2 3 The perfect storm The boom of activity in North Dakota has led to state legislature trying to catch up to the industry Yet at the same time legislators are trying to remain employer friendly to attract more large oil and gas companies which North Dakota has done However in the US shale sector many of the companies are small to mid sized and many of these companies farm out work to contractors who are not bound by and or disregard safety rules These elements are what contributed to a massive increase in accidents Herk cites the following statistics In North Dakota drilling counties population increased by 43 percent in the last decade however traffic fatalities increased 350 percent According to the North Dakota Petroleum Council since 2007 oil and gas job growth has tripled worker s compensation claims have quadrupled and oil and gas truckers workers compensation claims have grown sixfold There are lots of accidents happening and many people are dying but companies are taking a rather relaxed approach to the problem and continuing to subcontract field management positions The Denver Post writes that While companies such as Noble Energy Encana and Anadarko are the face of the industry its backbone is made up of small companies many with only a handful of employees In this environment responsibilities can become blurred and safety policies can be confused This is in part a cause of the work in the oil and gas industry being so dangerous Furthermore it does not help when companies have become delinquent Oilman Magazine May June 2017 OilmanMagazine com Photo Credit ronniechua www 123RF com in paying worker s compensation premiums Even with the lowest premiums in the nation the companies are still not paying The International Business Times reports that If a company doesn t pay up the state waits 60 days before assessing employers a penalty interest of 2 percent per month on outstanding balances The state does not disclose how much individual employers owe nor how long active accounts have been delinquent The average delinquent account stands at 7 553 Take safety seriously This is a very serious situation because in order to save money during the downturn companies are sacrificing insurance and safety along with workers to turn a profit While regulation is a four letter word to free enterprise when lives are at stake then regulation must be implemented to protect people There are safety systems in place to shield and protect but if rules are regulations are not being enforced then serious accidents happen that damage the reputation of the entire industry https www ncci com Articles Documents II_IR2015 Herk pdf 1 http www insurancejournal com news national 2014 10 09 343201 htm 2 http www ibtimes com oil gas companies aredodging workers compensation payments northdakota 1820546 3

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OILMAN COLUMN Interview with former Russian Energy Minister Igor Yusufov 2001 2004 By Eric R Eissler Continued from page 10 achievement are now analyzed in Houston with common realization of the huge project This is a striking example of the synergy our countries can show if the slogan of economical priority will be realized in American policies Meeting the Secretary of State Rex Tillerson Former CEO of Exxon Mobil from April 2002 I dare to assert this tough and very professional master of energy diplomacy whose skills will be now required in global diplomacy has deep understanding of the US Russian energy situation I described in this interview This is the reason why in a series of interviews in the beginning of 2017 the Guardian BusinessWeek Rigzone Energate I spoke in favor of a convocation of the Third Russian American Commercial Energy Summit The summit s format proved to be very effective since the two previous summits 2002 in Houston and 2003 in Saint Petersburg gave the unique opportunity to gather both representatives of all interested government agencies and from private enterprise on both sides Russian American working groups for oil and gas markets environmental protection and oil spill prevention functioned before and after the summits and made a serious contribution to the understanding of the possibility of the bilateral energy partnership Projects were discussed which are still on the agenda Russia has much to offer for companies known for possession of advanced technologies excellent management and investment capabilities Furthermore those who will be first when political conjuncture will change and the doors will be opened and this is inevitable will gain from this cooperation For sure we understand that many projects e g Russian off shore areas could benefit from participation of companies as supermajor BP Norwegian Statoil France based Total and Italy s ENI For skeptics I would add that politically motivated sanctions represented a serious stress test for the Russian energy branch of government But it was not a fatal blow Russian scientific institutions are actively developing nearly 70 import substituting areas for oil and gas production including electric energy In terms of investments 2016 was a record year Chinese Beijing Gas invested 1 2 billion into the Rosneft project Verkhnechonskneftegas 5 billion was invested by the Indian ONGC Videsh Limited into East Siberian Rosneft projects Finally the privatization of 19 5 percent shares of Rosneft with participation of the Swiss Glencore and the Qatar Investment Authority brought 10 2 billion to the Russian budget As you can see there are no American companies among participants of these deals And this fact has to be remarked not only by readers of this interview from both shores of the Atlantic The third consideration I already mentioned is the proclaimed priority of pragmatic and economic factors in American policies and the benefits of working together with Russia on energy projects The US and Russia have reset relations numerous times What do you think will be different under a new administration What advice recommendations would you offer the new Secretary of Energy Rick Perry On the 6th of March 2009 in Geneva US Secretary of State Hillary Clinton presented Russian Foreign Minister Sergei Lavrov with a red button with the English word reset which was mistranslated in Russian to overload Coincidently this overload is exactly what happened in bilateral relations My sincere hope for a successful reset is based on a series of observations Knowing Secretary Perry a bit after the first Russian American commercial energy summit in Houston Texas in 2002 I am sure that this key position in the administration is now occupied by a person of rich knowledge of energy issue and challenges In my opinion the nomination of a politician of such experience to this position is a clear indication of the American desire to make energy an important element of the policy in a wide meaning of the word Moreover with pragmatism being the main principle of the new American paradigm there are substantial hopes that the US and Russia will be able to cooperate on the huge field of energy projects Exactly the way the 3 billion company Fund Energy does The investment entity I founded six years ago managed to attract Halliburton as supervisor of the Fund Energy drilling operations in one of the Siberian projects despite the sanctions First the restoration of economic ties has been prioritized by Presidents Putin and Trump already in their first telephone conversation in January We can hope that energy as a cornerstone of every economic development is able to play the catalytic role for this restoration The second factor is a better understanding of Russia in the present US administration and this is not merely the former Exxon Mobil CEO Rex Tillerson who knows how to deal with Russia Just remember the Davos interview of the Trump advisor Anthony Scaramucci who spoke about the positive attitude of the American president towards the common history of our countries and the fact that sanctions resulted in a closer embrace of President Putin by the Russian people Finally our experts would be glad to contribute to the convocation and preparation of the Third Russian American Energy Summit since we have corresponding expertise and experts who negotiated the programs of the previous summits Oilman Magazine May June 2017 OilmanMagazine com 15

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OILMAN COLUMN Uncovering Great Deals By Josh Robbins I have all of the Oilman magazines that I ve ever been featured in on my bookshelf I m surprised at how many there are and humbled that I continue to be featured As someone who writes articles on the state of the oil and gas acquisition and divestiture market I see the trends developing far before they become buzzwords on Wall Street I was actively sourcing deals in 2014 that were focused on capitalizing on the horizontal San Andres We were buying STACK acreage in 2014 for 650 an acre We were buying gas assets in the Haynesville in early 2016 when gas was 1 56 per million BTU How could we find deals in the places we did during the time we made them happen In this industry intelligence is not lacking We have some of the smartest teams on the face of the Earth They find how to extract transport and engineer every kind of hydrocarbon you can imagine In this economy I don t care what kind of landowner you are you d love to see an oil and gas landman on your front porch asking to lease your land We work with these highly intelligent teams that have specific target areas they want to attack And we uncover great deals The number one question I get How does Beachwood do it But the better question How can your company do it Hire Beachwood of course I m only half kidding We ve talked about this secret before The secret to finding the great deals is to build great relationships Beachwood has the great privilege to have fantastic relationships with both the highly intelligent teams buying assets as well as those looking to monetize their assets in today s market Did you read the story about the Bass family selling out The first line of the story wasn t Exxon placed the top bid It was that Rex Tillerson built a relationship with Sid Bass and convinced Sid to sell the 60 billion barrels of oil that currently resides under their properties All for the discounted price of six and a half billion dollars Ask any oilman about getting a deal done They will tell you with certainty that it takes just as long to do the small deals as it does to do the large ones But to do them you need patience and a true understanding of your value of an asset Exxon isn t looking at the current production They are looking at the 60 billion barrels of future growth and production At Beachwood we make continuous contact with all different levels of an organization Our database is filled with people who used to be the VP at one company or the Executive VP of another organization but who are now the CEO of their own company We know that the industry is growing it s vibrant and it is not slowing down Many of you have started to notice the trend of legacy assets transferring to the next generation Most of the time the value of the asset naturally decreases because there is more than one heir in this next generation And with decreased value comes the intrigue to sell The sales are happening We have seen a stream of deals continue to flow throughout all of Quarter 1 With the price of oil declining the deals are also becoming more and more attractive for the long term operator Uncovering these deals takes time but with time comes great reward Find a great team to work with Success is never a one person celebration Oilman Magazine May June 2017 OilmanMagazine com 17

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OILMAN COLUMN NGL Plant Filters Overburdened Automated Equipment Integration Saves Money By U S Water An NGL plant is producing an unusual product for use in the oil and gas industry However the chemical processes to produce this product are wreaking havoc on the filtration system and heat exchanger This high use of filters and heat exchanger cleanings and descalings were costing the plant more than 200 000 per year in extra filters and maintenance The contaminants being produced as a byproduct were clogging filters and causing iron scales to build up in the exchangers The plant operators could not afford to overlook this issue because it would lead to damage to the heat exchangers and the condensate stabilizer which would put the plant at risk for unscheduled downtime Custom Integrated Solution Chemical and process analysis was conducted to determine a custom solution to the problem The consulting company developed an automated integrated system to inject a proprietary chemical additive formulated to dissolve and inhibit iron scale build up This system was designed to be used upstream of the process equipment Two month payback period yields 350 percent return on investment equipment the plant has reduced the number of filters it needs to use Filter replacement has dropped from every three days to every six weeks saving the plant 157 000 in filter replacement costs Furthermore the heat exchangers have not required any cleanings since the new system has been integrated into the system The lack of cleanings has saved the plant an additional 38 400 Within a two month payback period the plant made an approximate 350 percent return on its investment To learn more about this process visit U S Water Services http www uswaterservices com our products Since the implementation of the new Our mission is to create a better CUSTOM SOFTWARE reality for you and your company MOBILE DESIGN DEVELOPMENT That means working with you as one WEB DESIGN DEVELOPMENT team to deliver a custom digital BRAND STRATEGY solution that exceeds your goals SEARCH ENGINE OPTIMIZATION ENVOC COM 225 910 8239 HELLO ENVOC COM BATON ROUGE LOUISIANA 18 Oilman Magazine May June 2017 OilmanMagazine com

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FEATURE On March 14 2017 Dominion Energy President Diane Leopold went before the U S Senate Committee on Energy and Resources to deliver a message on several energy projects including the highlypoliticized Atlantic Coast Pipeline or ACP Leopold s statements highlighted the noticeably lengthy process that oil and gas companies must go through to get a project from conception to completion Although the permitting process is just one part of the puzzle oil and gas companies must piece together to construct a new pipeline Leopold s comments made clear that it is consistently a complex one As noted by Leopold in her statements part of that complexity is meted out under a mountain of paperwork more than 130 000 pages on numerous routing analyses plans and protocols explained Leopold Given that one might also come to believe that Leopold and many other oil and gas companies with pending projects would view the Federal Energy Regulatory Commission FERC as an enemy to progress Reality however dispenses different truths in this situation We are not seeking to limit any of the public review or detailed examination by resource specialists in federal agencies Leopold said We do believe however that there needs to be improved coordination among federal agencies timely review and decision making and a clearer path to present evidence so that there is a predictable defined process to meet requirements by multiple federal agencies within a coordinated schedule Leopold s comments are echoed by others including Dominion Manager of Transmission Communication Frank Mack who told Oilman that Section 41 of the Fixing America s Surface Transportation Act FAST could be used for regulatory modernization FAST 41 could be a vehicle for achieving more project schedule coordination and timely reviews Mack said adding that Dominion is working with the current Administration to identify areas for improvement FAST 41 allows some projects to get pushed forward with more interagency coordination and faster environmental review streamlining the permitting process Primarily larger oil and gas companies with projects that present a more pressing need initially qualified for FAST 41 20 On September 22 2016 the Federal Infrastructure Permitting Improvement Steering Council FPISC released a list of 34 projects considered covered by FAST41 a list that included the ACP Still the FAST 41 process is widely viewed as a valuable process to end the deadlock that can occur with interagency permitting and FAST is viewed as a positive reform initiative Although the FAST Act which was signed by President Obama in 2015 was designed to streamline the permitting process as a whole some oil and gas industry leaders see FAST 41 as a good model for the type of efficiency that can be applied more universally to the regulatory process FERC Maintains Only Limited Control As a regulatory body FERC is presently in the midst of a shakeup First established in 1920 as the Federal Power Commission FERC s primary function regulation has at times appeared in opposition to the American oil and gas industry When necessary pipelines and interstate energy transmission lines need construction oil and gas companies must begin to navigate through an extensive list of required permitting much of which begins and ends with FERC It is not uncommon to find negative media coverage on FERC s inefficiencies yet news reports may not be presenting an entirely accurate picture There remain numerous misconceptions on just how much influence FERC has over the sometimes slow pipeline permitting process with many charges of inefficiency often wrongly attributed to the regulatory body While the bi partisan chairmen and women heading FERC have for some time been free to accept or deny project applications without outside political influence they often become the scapegoats for long delays in oil and gas pipeline projects Perhaps the most hidden story behind FERC is not just that it has far less control over long delays but that it also has far more support within the oil and gas industry than it does among environmentalist groups Many groups opposed to oil pipelines on a matter of principle are quick to label FERC as a rubber stamp for the oil and gas industry Still the election of President Donald Trump whose strong anti regulatory stance Oilman Magazine May June 2017 OilmanMagazine com was made known on the campaign trail and has since been reiterated from the Oval Office may make some observers wonder if the FERC we see today will be the same organization four years from now Given the recent loss of three members of the five member regulatory body and President Trump s early March nomination of more chairpersons the timing itself may seem to work in favor for the President s desire to enact more regulatory reforms Other regulatory bodies such as the Environmental Protection Agency EPA have already found themselves in the crosshairs for new reforms that seek to peel away regulatory layers built up over the past several decades The question remains as to whether FERC both needs such regulations and whether oil and gas companies truly desire to see the FERC permitting process undergo any of the major reforms that other regulatory agencies now face The FERC Permitting Process Top to Bottom The interstate energy transmission projects that FERC regulates including oil natural gas and electricity must follow a somewhat rigorous process from start to finish According to the Interstate Natural Gas Association of America INGAA one of the largest oil and gas industry trade organizations there are five key steps in the permitting and approval process Needs Assessment Scoping Pre Filing Formal Application Approval of the FERC Certificate Approval of Any Remaining Certificates Needs Assessment The first step toward a new pipeline project involves identifying the market need During this phase prospective companies must be able to show a legitimate need in the market for the pipeline Open houses are held during this period to acquire firm contracts and commitments to the project During this process companies will also identify and contact landowners about the potential project Without such firm commitments FERC will not allow the project to move forward

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FEATURE Pre Filing If the needs assessment requirements are adequately met project sponsors may decide to enter the FERC pre filing process This process which can last well over a year will be highly involved for project sponsors as they hold various public meetings cosponsor scoping meetings with FERC draft potential pipeline routes determine methods to limit the impact on landowners amid other necessary steps During this process FERC is involved in helping ensure compliance with regulatory standards and will make a decision at the end of the process as to whether or not the project can proceed Formal Application During the formal filing process FERC will deliver an environmental impact statement or an environmental assessment as pursuant to the National Environmental Protection Act NEPA depending on their findings It is at this point that several permitting agencies are also involved at both the state and federal level While other federal and state agencies are also tasked with keeping to a strict timeline it is during the formal application process where many projects face significant delays due to non FERC permitting requirements This process can take 10 to 14 months or longer Approval of the FERC Certificate If FERC finds that environmental concerns are adequately addressed it may issue a certificate of public convenience and necessity This certificate will allow the public to understand the nature of the project and will permit the project to proceed The final certificate may require other conditions such as route changes or limits to a specific time of year for construction Approval of Remaining Certificates Once FERC has issued its certificates other permitting agencies must complete and issue their certificates as well This is the process that many see as causing the most delays as other organizations such as the Army Corps of Engineers or state environmental departments may lag far behind FERC in issues their certificates At present projects can average three to four years due to project sponsors waiting for other permitting agencies that fall behind prescribed timelines Coordination Remains Regulation s Biggest Obstacle During the permitting process companies hoping to lay down new interstate pipelines or other interstate energy transmission projects must make thousands of filings with various agencies not just FERC Although FERC is the primary regulatory body projects also require permit approvals from a variety of different agencies some of which may or may not approve those permits or that may fail to meet timelines dictated in the Energy Policy Act of 2005 On permitting slowdowns related to interagency coordination Cathy Landry Vice President of Communications at INGAA explained it to Oilman this way We d like to see FERC have some actual authority to enforce deadlines from other permitting agencies The Energy Policy Act of 2005 did put deadlines on other agencies to act but they have not been enforced and FERC has no authority to enforce those deadlines According to Chip Moldenhauer in an article on FERC regulation for the LexisNexus website Law360 FERC approves a vast majority of its projects over 95 percent In the article titled 5 Myths About Building Natural Gas Pipelines Moldenhauer also states that FERC only dismissed 0 9 percent of projects since 2008 with the remaining projects primarily withdrawn or suspended by the company that originally filed for a permit Removing political commentary from the equation and focusing purely on the FERC regulatory process there appears to be more of a positive story to tell for and within the oil and gas industry Where FERC may get the permitting process right is in its wholly transparent approach to regulation a situation that some may note is a rarity in Washington Where FERC suffers the most may not be in its regulatory approval process but its lack of authority over other regulatory bodies integral to the permitting process Viewed holistically the FERC permitting process comes across as a more seamless activity than what some may believe while oil and gas companies appear to have a better interaction with FERC than with other regulatory bodies Many companies and professional organizations do express the desire to see FERC work more cohesively with other permitting organizations on which its own process relies while hoping to see an increase in timely decisions made by those organizations Commission Members Can Cause Deadlocks Nevertheless transparency within the FERC permitting process cannot overcome other challenges that stymie new and pending project approvals The organization s methods rely on a quorum rule that dictates it cannot make decisions without at least three commission members By law the Commission is headed by five members However since the beginning 2017 the regulatory body has operated with just two members Shortly after President Trump took office he selected a new chair Cheryl LaFleur D to head up the commission Immediately afterward the newly displaced chairman Norman Bay opted to leave FERC Some reports indicate that Bay s decision to leave was based on a perception that President Trump would be removing one of the three Democratic members as a way to put in place three new Republican members By law the commission can have no more than three members of any one political party Bay s stepping down from FERC left a vacuum in the permitting process With only two members left LaFleur and Commissioner Colette D Honorable D a quorum could no longer be reached In effect Bay s action put a halt on new or pending project approvals forcing Congress to press the newly elected President to nominate new members far sooner Many oil and gas companies still hold FERC in high regard despite slowdowns in the process Should new reforms occur during the next four years most may advocate giving FERC more control over enforcing timely approvals Whether the current administration will favor only a limited approach to FERC reforms or a more heavy handed approach as is the case with the EPA remains to be seen Oilman Magazine May June 2017 OilmanMagazine com 21

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OILMAN COLUMN A new funding solution is needed for oil decommissioning By Nicholas Newman At the time of writing we are seeing an increasing number of media reports detailing the huge number of abandoned oil wells in Alberta and Texas In addition governments and the industry are experiencing growing concern over the increasing costs of decommissioning and reinstatement of both onshore and offshore oil and gas fields With oil prices at an unexpected alltime low long held assumptions about funding prospective decommissioning and reinstatement costs are proving unrealistic in meeting the requirements of many producers and regulators Public opinion and governments in general will no longer tolerate the abandoning of such installations by the energy industry leaving the hardpressed taxpayer with a problem running into billions of dollars to resolve In fact as both the industry and governments turn their attention to these issues it is becoming clear that this problem is increasing in scale as energy resources mature and become more expensive to operate In the current tough economic climate there has been a rise in the number of wells abandoned or orphaned by operators At the last count there were some 1 400 abandoned wells in Alberta and more than 10 000 in Texas Today Alberta s current abandoned well clean up fund has only 240 million in the kitty whilst current estimates suggest that at least 29 billion is needed Funded systems are experiencing a similar shortfall in US states including Texas Expecting local regulators and taxpayers to foot bills amounting to billions of dollars to meet the costs of decommissioning is likely to prove unrealistic Tackling The Abandoned Oil Well Problem In the light of these decommissioning and reinstatement challenges that face not only the oil and gas producers but their regulators and governments London based Quatre Ltd has come up with a product and services package known as ESMS Exit Strategy Photo Credit Anan Kaewkhammul www 123RF com Management Solutions which offers new funding and environmental liabilities solutions for decommissioning oil and gas assets The ESMS model addresses the decommissioning and reinstatement of on and offshore oil and gas fields and their associated post decommissioning environmental liabilities while maximizing economic recovery and protecting the public purse The key goal in the early stages is the protection of the operators Joint Venture partners capital by using an SPT Special Purpose Trust The SPT financial capacity is developed by annual contributions targeting a 3 percent annual Net Value Increase Contributions are based on the client company s cash and cash flow forecasts Special Purpose Trusts enjoy several advantages over traditional methods such as LOC Letters of Credit or Security Bonds all of which impose high annual maintenance fees In addition the SPT is working on behalf of the client to deliver increased value and reduce over a period the total value of the annual contributions as the SPT builds capacity Once the funding is allocated to the SPT it is ring fenced for decommissioning and reinstatement purposes only and protected against the prospects of insolvency Essentially the SPT funds are used to pay for the decommissioning and reinstatement as well as for any other associated cost related to the decommissioning The second key goal is to ensure that environmental liabilities are transferred from the operator post decommissioning allowing them to step away asset efficiently Quatre have developed long term insurance products that allow this to happen even with the potential to include the regulator as an insured party if the operators are no longer viable when the liability is realized By protecting the public purse Quatre s ESMS gives government regulators and treasuries greater confidence in the operator while showing that the Joint Venture partners are addressing their environmental economic and corporate social responsibilities in a clear and transparent manner Adopting the Quatre ESMS model will therefore tackle many of the long running decommissioning and reinstatement challenges which are today facing both the operators of oil and gas fields and their governmental regulators To find out more about Quatre Ltd contact me and look at the http www quatre ltd com Oilman Magazine May June 2017 OilmanMagazine com 23

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NEWS AT A GLANCE Strong Indicators Give Boost to Oil Price By Tim McNally The price of oil received a boost after an April 11 announcement by the two largest oil producing nations revealed that they were considering continuing production cuts Their announcement coupled with a decrease in the overall level of crude stocks in the U S helped feed into the price gains Reports were circulating on Tuesday that Saudi Arabia had informed OPEC officials that it was looking to continue its oil production cuts for another six months according to Reuters The move might persuade other OPEC members to follow suit and extend their respective oil production cuts for longer than originally planned In addition Russian Energy Minister Alexander Novak stated on Tuesday that the Energy Ministry would initiate talks with Russian oil companies about possibly extending current production cuts until June Novak stated that it was not a certainty that the OPEC production cuts which would likely include non OPEC members such as Russia would be extended at the next meeting Russian news site TASS reported Data from the U S government has shown that crude inventories have been reaching record highs in the past few weeks but data from the American Petroleum Institute showed that U S crude inventories declined in the week to April 7th The decrease in U S crude stocks was attributed to a decline in imports and an increase in refinery runs The amalgamation of all this positive data seems to have contributed to a friendly atmosphere for the price of oil Reuters noted that Brent crude LCOc1 an international standard for the price of oil saw a 25 cent increase settling at 56 23 per barrel Likewise the price of U S West Texas Intermediate crude oil rose 32 cents to 53 40 the highest price in over a month However the increase in the oil price should not be seen as a sign of a continuing trend as demand within the oilfield is still not strong enough to support the mounting demand The decrease in U S oil inventories is also a good sign but given the consistent increases in oil stockpiles over the last few months the effect the recent decrease has had on the overall inventory levels was rather negligible Nonetheless the combination of these positive events that occurred on April 11 was a good omen for the oilfield as a whole Some have used the phrase energy independent Others tout the idea that increasing supplies of energy produced domestically will also increase our financial and national security President Trump on Tuesday March 28 issued an executive order reversing many of the detrimental policies implemented by the Obama administration One of the most controversial orders issued by Obama dealt with the adoption of a policy that allowed the administration to compute the social cost of carbon and used this to justify their energy and environmental policies This concept was never authorized by Congress and never adopted using the Administrative Procedure Act It is based on questionable processes to calculate the impact of carbon reductions on climate changes Trump s order requires reconsideration of the process that was used to justify a wide range of regulations The order also instructs the Department of Justice to tell the U S Court of Appeals that it wants to delay a legal case brought by states and industry groups which challenges the Clean Power Plan A key component of the Clean Power Plan was the adoption of EPA s methane rule in the final year of the Obama administration States and industry organizations filed a lawsuit against the rule which is pending in D C U S Court of Appeals The oil and gas industry had stressed to EPA and other federal agencies that methane and carbon dioxide CO2 emissions have been declining for years and the strict standards set by the Clean Power Plan were not necessary According to the U S Energy Information Administration EIA U S energy related CO2 emissions during first six months of 2016 declined to the lowest emission levels since 1991 EIA reported CO2 emissions totaled 2 530 million metric tons in the first six months of 2016 EIA attributed the reduction to mild weather and changes in the fuels used to generate electricity which contributed to the decline in energy related emissions EIA s Short Term Energy Outlook projects that energy associated CO2 emissions will fall to 5 179 million metric tons in 2016 the lowest annual level since 1992 By Alex Mills Also EPA recorded another drop in methane released from the nation s petroleum and natural gas sector prompting calls from industry to take down Obama administration s efforts to control emissions from oil and gas sources Energy policy has taken an about face in Methane from energy production processing Trump Orders Agencies To Identify Obstacles To Energy Production 24 the nation s capital Instead of the President implementing policies to restrict the use of the nation s most plentiful energy sources the nation s new leader encourages domestic energy production and believes in limiting imports Oilman Magazine May June 2017 OilmanMagazine com and storage infrastructure reached 70 3 million metric tons of carbon dioxide equivalent in 2015 down 3 8 percent from 73 1 million metric tons the year before Last year marked the fourth consecutive year that the sector s methane emissions have declined Across production fields in oil rich Texas methane emissions fell by a combined 3 58 million metric tons of CO2 equivalent between 2011 and 2015 The White House said the order would direct each federal agency to identify rules and policies that serve as obstacles or impediments to domestic energy production Joint Venture to be Formed by Schlumberger and Weatherford By Tim McNally On March 24 Schlumberger and Weatherford announced an agreement to create a joint venture known as OneStim According to a joint release by the companies the venture will offer one of the widest ranges of multistage products and services in addition to a massive hydraulic fracturing fleet The joint venture creates a new industry leader in terms of hydraulic horsepower and multistage completions technologies in North America land which through its scale offers a cost effective and highly competitive service delivery platform stated Schlumberger Chairman and Chief Executive Officer Paal Kibsgaard OneStim will focus on providing the necessary products and services to develop unconventional resource reservoirs within the United States and Canada Schlumberger will be providing the joint venture with surface and downhole technologies increased efficiency for operations and geo engineered workflows Weatherford will be providing its comprehensive multistage completions portfolio its cost effective regional manufacturing capabilities and its supply chain OneStim is uniquely positioned to provide customers with leading operational efficiency and best in class hydraulic fracturing and completions technologies while at the same time significantly improving full cycle shareholder returns from this market continued Kibsgaard Ownership of the joint venture will be split 70 30 with Schlumberger holding the larger portion The venture will be managed by Schlumberger and the firms expect the transaction to close in the second half of this year Per the agreement all of Schlumberger s and Weatherford s North American hydraulic fracturing pressure pumping assets multistage completions and pump down perforating businesses will be assigned to the venture

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NEWS AT A GLANCE In addition Schlumberger will be paying Weatherford 535 million in cash This transaction will allow Weatherford to deleverage its balance sheet while retaining a significant exposure to the unconventional market stated Weatherford Chairman William E Macaulay This transaction was unanimously approved by the Board of Directors and will create significant value for both parties Natural Gas Gets Good News By Alex Mills Two important events that occurred last week have the potential to impact natural gas supplies significantly in the future First the U S Geological Survey USGS increased by more than 300 percent its assessment of natural gas reserves in East Texas Louisiana and the Gulf Coast Second the Environmental Protection Agency EPA said it will reconsider a new regulation covering methane emissions during oil and gas activities The USGS report on the Bossier and Haynesville Formations of the onshore and state waters portion of the U S Gulf Coast contain estimated means of 4 0 billion barrels of oil 304 4 trillion cubic feet of natural gas and 1 9 billion barrels of natural gas liquids Prior to this report the USGS estimated in 2010 that the Bossier and Haynesville Formations contained a mean of 9 0 trillion cubic feet of natural gas while the Haynesville was estimated to contain 61 4 trillion cubic feet of natural gas As the USGS revisits many of the oil and gas basins of the United States we continually find that technological revolutions of the past few years have truly been a game changer in the amount of resources that are now technically recoverable said Walter Guidroz Program Coordinator of the USGS Energy Resources Program Changes in technology and industry practices combined with an increased understanding of the regional geologic framework can have a significant effect on what resources become technically recoverable These changes are why the USGS remains committed to performing the most up to date assessments of these vital resources throughout the United States and the world It s amazing what a little more knowledge can yield said USGS scientist Stan Paxton lead author of the assessment Since the 2010 assessment we ve gotten updated geologic maps expanded production history and have a greater understanding of how these reservoirs evolved All of that leads to a better geological model and therefore a more robust assessment The Bossier and Haynesville Formations have long been known to contain oil and gas but it wasn t until 2008 that production of the continuous resources really got under way in East Texas and North Louisiana the primary production areas for the two formations A day following the USGS report EPA announced that it will reconsider the methane rule American businesses should have the opportunity to review new requirements assess economic impacts and report back before those new requirements are finalized EPA Administrator Scott Pruitt said The oil and gas industry protested the final adoption of the rule in 2016 when it was learned that the preliminary rule had been changed because of lobbying efforts by environmental groups after the deadline for comments The draft was changed to suit the environmental groups without a chance for industry to point out the problems with the change Industry also has filed legal action against the rule The Trump administration has filed a motion to delay litigation of the lawsuit Alex Mills is President of the Texas Alliance of Energy Producers The opinions expressed are solely of the author HEAR WELL P A AND DECOMMISSIONING INSIGHT DELIVERED BY May 23 24 Doubletree By Hilton Greenway Plaza Houston wv DEVELOP YOUR 2017 2018 DECOMMISSIONING STRATEGY CONSIDERING REGULATORY REQUIREMENTS NEW DEEPWATER P A TECHNOLOGY AND EMERGING COLLABORATIVE INITIATIVES REASONS TO ATTEND DDW 2017 OPERATOR CASE STUDIES Gain unparalleled insight into recent P A projects through 4 operator case studies 3 targeted panels to plan your decommissioning strategy for 2017 2018 WELL P A Tap into GOM P A execution best practice including new contracting models cost estimation methodology technology developments such as riseless coiled tubing and resins SPONSORS NEW TECHNOLOGY Access cutting edge tooling developments cement alternatives and riserless equipment in a dedicated agenda section and throughout our interactive technology showcase hall WORKSHOPS Take advantage of 3 dedicated hands on workshops including a well P A technical session a regulatory update an operator only breakfast focused on practical paths to collaboration STRUCTURE REMOVAL Discuss the future of deepwater structure removal taking into consideration initiatives such as NEBA and the Rigs to Reef program to ensure best practice is in place in the GOM Sam Scarpa Project Manager Offshore Network Ltd 713 5706 576 sscarpa offsnet com Oilman Magazine May June 2017 OilmanMagazine com 25

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OKLAHOMA NEWS AT A GLANCE Photo Credit Evgenii Bashta www 123RF com Mammoth Energy Acquires Three Oil Companies By Tim McNally Mammoth Energy Services Inc announced on March 21st that it is purchasing three oilfield services companies in an effort to further its offerings in the industry The pending acquisitions of Taylor Frac Stingray Energy Services and Stingray Cementing represent a natural step for Mammoth to continue to expand its integrated service offering stated the Oklahoma based company s CEO Arty Straehla Mammoth will acquire Sturgeon Acquisitions LLC Stingray Energy Services LLC and Stingray Cementing LLC at the cost of seven million shares of common stock The cash value of the stock based on the March 20th closing price of 19 06 is 133 4 million The deal includes 7 3 million of debt which is largely canceled out by a 6 9 million 26 positive working capital balance Sturgeon Acquisitions owns several companies including Taylor Frac which operates a 0 7 million ton per year sand mine and processing plant and owns 37 1 million tons of mostly high grade recoverable reserves Mammoth plans to spend 23 million to expand the current capacity of the facility so that it will produce 1 75 million tons per year by the end of 2017 Taylor Frac will provide surety of sand supply for our expanding pressure pumping fleet as well as broaden our service offerings to our customer base stated Straehla We believe that over the coming months we will continue to see increasing demand for pressure pumping sand and logistics services and that the Taylor acquisition will support our ability to meet this increased demand The Stingray companies operate mostly in the Appalachian basin region in the areas of fresh water transfer equipment rental refueling and cementing The Oilman Magazine May June 2017 OilmanMagazine com firm was formed in 2012 and has been quickly growing to support the cementing needs of its customers It most recently expanded its capacity by 66 percent to meet the ravenous demand Bankruptcy Restructuring Offers Relief to Chaparral Energy By Tim McNally Oklahoma City based Chaparral Energy a private exploration and production company announced on May 9th that it had filed for Chapter 11 bankruptcy relief in the Court of Delaware The poor economic environment in the oilfield in addition to the company s high levels of debt led the firm to conclude that they needed to restructure their balance sheet in order to maintain their operations The continued depressed price environment coupled with our existing debt levels have severely limited the company s overall operational ability former CEO Mark Fischer stated in a press release By significantly reducing

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OKLAHOMA NEWS AT A GLANCE According to a news release by The Woodlands Texas based Newfield Exploration Company the company recently decided to break ground on a new recycling facility The facility s purpose will be the cleansing and eventual reuse of flowback and produced water from its operations in the Sooner Trend Anadarko Basin Canadian and Kingfisher counties also known as the STACK regions The facility will be located in Kingfisher Oklahoma and will use aerated biologic treatment technology to recycle water for use in hydraulic fracking operations Photo Credit Daniel Fela www 123RF com our debt and restructuring our balance sheet Chaparral will be better positioned to not only weather this down environment but also increase our long term financial security and better position us for long term success percent of the company The firm will have an initial borrowing amount of 225 million and 50 million of new money equity The firm expects to have upwards of 100 million in liquidity when it emerges from the bankruptcy proceedings On March 13th a judge ruled that the firm s plan for restructuring was acceptable thereby enabling the firm to reduce its debt by nearly 1 2 billion The firm expects a smooth transition during their emergence from bankruptcy as operations during the restructuring period will continue as usual with slight changes to the debt and equity of the company A new seven person board will be governing over the firm s operations including CEO K Earl Reynolds Douglas Brooks Matt Cabell Robert Heinemann Sam Langford Ken Moore and Gysle Shellum We are very excited to welcome an extremely talented and seasoned board of directors to Chaparral stated Reynolds Their combined wealth of industry and leadership experience will be invaluable to Chaparral as we embark on the next successful chapter in our company s history We are tremendously pleased to announce the confirmation of our plan by the court today stated the new Chief Executive Officer K Earl Reynolds Thanks to the hard work of everyone involved with this process Chaparral will emerge from Chapter 11 within the next few weeks as one of the most financially stable oil and gas companies of its size in the industry This security coupled with our outstanding STACK assets will be the driving force behind Chaparral s success for decades to come The plan is heavily focused on a debt toequity exchange with bondholders and creditors with unsecured bondholders and general unsecured creditors owning 100 Newfield Looks to Recycling to Boost Cost Efficiency By Tim McNally As companies seek to maximize efficiency in this unfavorable economic environment they employ new technologies which enable them to re use certain resources in a costeffective manner Whether it be through software hardware or new refinery or recycling facilities equipped with state of the art technologies companies are increasingly looking to new means to gain a competitive edge The new Barton facility will be capable of recycling both the flowback and produced water currently generated from our STACK wells and hydraulic fracturing operations stated Newfield Chairman Lee K Boothby Today s innovative technologies are allowing us to more cost effectively recycle and reuse the water we produce from our operations This is good for our economics and good for the environment he continued The facility which will be named the Barton Water Recycle Facility will require a multimillion dollar investment and will process roughly 30 000 barrels of water per day It will be built upon a 30 acre site and will have the ability to store 6 5 million barrels of water in underground pipelines The process for treating the water uses natural and enhanced bioremediation to separate and exterminate impurities in the produced water The firm will be able to use the recycled water in its fracking operations as the quality of the water will be similar to the water originally found in reservoir rock The time when the procurement and disposal of water in oil and gas operations was viewed as routine is over stated Dana Murphy the Chairman of the Oklahoma Corporate Commission Water has now become an absolutely critical component that demands careful planning for environmental conservation and business reasons This facility is a step in the continuing evolution of the industry The facility is expected to be completed early in the third quarter of 2017 Oilman Magazine May June 2017 OilmanMagazine com 27

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TEXAS NEWS AT A GLANCE The Bakken is Poised to Boom Again By Eric R Eissler The Bakken is back in business after the first month of the new year With the newly inaugurated President Trump at the helm of the nation the oil and gas industry is getting the big break it needs after a two year slump that devastated the industry on the U S front This is because President Trump is for deregulation of the industry According to oilfield services provider Baker Hughes the rig count is up to 729 active rigs in the U S compared to 541 on the same day in 2015 1 The executive director of Williston Economic Development the town is the center for Bakken activity said four oilfield services companies are poised to add some 300 jobs this first quarter The director went on to say that the slump did not cause the town to go bust but rather provided the time to organize and work on infrastructure projects that had been neglected during the boom years from 2010 to 2015 One of the major projects was getting the construction on the 240 million airport started 2 In addition to the job growth pipelines will see a period of growth under the Trump Administration The Dakota Access Pipeline is slated to be completed by June 1 2017 It has been delayed from its original completion date of the end of 2016 The pipeline will help cut costs for drillers in the Bakken and it will have a capacity to transfer about 470 000 barrels per day This figure represents about half of the current Bakken crude production 3 Bakken market A move like this could signal the start of the next boom cycle for Bakken The Bakken oil shale play is internationally positioned between the US states of North Dakota and the Canadian provinces of Saskatchewan and Manitoba The Bakken is estimated to contain some 3 65 billion barrels of recoverable crude oil making it the largest oilfield in the U S outside of Alaska http phx corporate ir net phoenix zhtml c 79687 p irol reportsother 1 http www foxbusiness com markets 2017 01 20 back to rockin bakkenjobs returning to americas oil patch html 2 https www bloomberg com news articles 2017 02 07 u s army corps to grantdakota access oil pipeline easement 3 Finally record prices for drilling rights in the Permian Basin the most fertile U S shale field are prompting oil companies and private equity investors to look elsewhere for the next big gushers Explorers eager to tap the basin s milethick stack of oil soaked rock layers have paid as much as 60 000 an acre It also pushes the cost 10 times higher than in Bakken It could be assumed that exploration companies may start to trek North and take advantage of a cooled 28 Left to right Scandrill Floorhand Brandon Pryor Scandrill President COO Paul Mosvold Sen Ted Cruz Scandrill Floorhand Gilmore Yeager Scandrill Driller Dustin Smith Senator Ted Cruz s Endorsement for the Oil and Gas Industry is Timely By Eric R Eissler Houston based land contract drilling services provider Scandrill hosted an official visit by U S Senator Ted Cruz R on Monday February 20 2017 The purpose of the visit was to view the Scan Gold a land rig rated to drill up to 20 000 Oilman Magazine May June 2017 OilmanMagazine com feet down and a 7 500 PSI mud system The visit is just in time for the uptick in the Permian Basin The oil and gas industry is heating up and the Senator s visit and endorsement of the industry and the Basin are important to the local state and national economy Senator Cruz was quoted as saying the people and the business in the Permian Basin are crucial to the economic strength of our state While the energy industry in Texas has been impacted by the recent downturn in oil prices we are beginning to see a robust recovery This is timely as the price of an acre in the Permian has risen to some 60 000 which is forcing some out but attracting the majors and the supermajors to claim their stakes and commence drilling Senator Cruz points out this ramp up as a testament to the strong work ethic of Texans and the efforts Texas has made to keep regulations to a minimum and empower those with new technology and innovative ideas to enter the marketplace An example of that is the recent announcement by Austin based MMEX Resources Corp on March 7 2017 to build a 450 million refinery in the Permian Basin s Pecos County The refinery would have a capacity to refine

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TEXAS NEWS AT A GLANCE Photo Credit Dejan Gerhardt www 123RF com up to 50 000 barrels of crude oil per day Producing petroleum based products such as gasoline diesel jet fuel and liquid petroleum gas among other products that will be shipped by rail to meet increased demand in Mexico Senator Cruz finished by saying While Texas continues to serve as a model for the success of restrained regulations I am committed to applying those same principles in Washington s approach He continued by stating that the new administration has shown that it understands the value of removing regulatory barriers and has already taken steps to unleash the potential of our energy industry Under the Trump administration the oil and gas industry looks forward to a new era of deregulation higher prices new innovations and a robust economy to drive the nation forward Increase in E P Spending and Job Growth for Oilfield By Tim McNally Since the unfortunate downturn of the oil market in 2014 Exploration and Production E P spending in oil companies has taken a large hit because companies have been pushing for profitability by decreasing overall spending These efforts to cut spending were also manifested in the loss of thousands of jobs for workers in the oilfield and the office environment However these trends might finally be seeing a shift in the opposite direction at least in some regions A Fitch Ratings report which measured spending across 40 US E P companies expects that an increase in overall CAPEX will increase E P spending by five percent this year the first time since 2014 In addition the data indicates that the average land rig counts in the US Lower 48 States will increase by roughly 60 percent yearover year This should push the total number of rig counts to around 850 by the end of 2017 In Texas total oil and gas employment increased to 211 700 in March an increase of 3 400 according to data from the Bureau of Labor Statistics which has been seasonally adjusted by the Federal Reserve Bank of Dallas According to Rigzone Kunal Patel senior research analyst for the Dallas Fed stated that The increase in employment likely signifies that activity is continuing to pick up in the industry and that there is demand for jobs as more rigs are put back to work In our 1Q 2017 Dallas Fed energy survey nearly all survey measures reflected expansion on a quarterly basis including our business activity index Further positive news in Texas includes the fact that the Texas Petro Index improved for the fourth straight month to 160 4 Economically speaking the TPI data indicate that when oil and gas industry gathers in Wichita Falls in late April for the annual meeting and exposition of the Texas Alliance of Energy Producers they will be meeting during a time of industry expansion for the first time in three years stated Karr Ingham the economist who created and maintains the TPI We still have a long way to go Ingham said but 2017 is going to be a year of recovery and expansion in the Texas statewide oil and gas exploration and production economy Activity levels will continue to expand jobs will continue to be added and the industry will support the broader state economy again rather than acting as a drag on growth as it has for the prior two years Oilman Magazine May June 2017 OilmanMagazine com 29

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LOUISIANA NEWS AT A GLANCE Appeals Court Rules in Favor of Oil and Gas Companies in Louisiana Case By Tim McNally On March 3 a federal appeals court affirmed a district court s decision to dismiss a case alleging that oil and gas companies were responsible for damage to the Louisiana wetlands The ruling brings into question other lawsuits that have been filed by Louisiana parishes concerning the effect oil and gas companies have had on the erosion of the wetlands The case at hand was originally filed in July 2013 by the Southeast Louisiana Flood Protection Authority East against 97 oil and gas companies including Exxon Mobil Shell Chevron and BP However a district court ruled in favor of the oil companies in 2015 a decision which was upheld by this most recent ruling of the 5th U S Circuit Court of Appeals I was pleased to see the U S 5th Circuit Court of Appeals affirm the lower court s decision to dismiss the Southeast Louisiana Flood Protection AuthorityEast s ill conceived lawsuit targeting the oil and gas industry for alleged coastal erosion Chris John President of LMOGA stated in a joint release with LOGA Our position remains validated by yet another court decision further proving these allegations are baseless and without merit In the same release Don Briggs President of LOGA said This ruling is a step in the right direction but we have many more miles to cover He also stated Divisive and unnecessary lawsuits like the Southeast Louisiana Flood Protection Authority East s and a multitude of other coastal lawsuits are creating an unstable legal environment for the state and driving new oil and gas investments jobs and tax revenue into neighboring states I applaud the court of appeals decision and we will fight to see that similar coastal lawsuits follow the same course of action Multiple parishes throughout Louisiana have filed their own respective lawsuits against oil and gas companies all alleging that such companies operations have 30 Photo Credit Natalia Bratslavsky www 123RF com caused substantial irreversible damage to the Louisiana wetlands Louisiana Governor Bel Edwards and New Orleans mayor Mitch Landrieu have been large supporters of such lawsuits urging all affected parishes to file lawsuits against the companies which they say are responsible The U S Geological Survey has noted that from 1985 to 2010 nearly 17 square miles of wetlands were eroded each year but it is unclear how much blame can be attributed to oil and gas operating in the area Simply pushing the blame onto these companies does not seem to be a productive move and as the Grow Louisiana Coalition has noted in the past a collaborative movement combining the efforts of multiple agencies and companies to restore the wetlands would be the optimal way to go about the restoration process A sincere discussion about addressing Louisiana s coast doesn t single out the state s largest industry As we continue to move forward in that work federal authorities including and especially the U S Army Corps of Engineers as well as the commercial and scientific interests who operate in coastal parishes and the parishes themselves must play a significant role whenever we talk about big issues including funding the coalition stated Oilman Magazine May June 2017 OilmanMagazine com Stone Energy Corporation Completes Restructures after Bankruptcy By Tim McNally Lafayette Louisiana based Stone Energy Corporation announced on February 28 that it had successfully completed the requirements for emerging from their chapter 11 financial reorganization The firm s plan for reorganization known as the Company s Second Amended Joint Prepackaged Plan of Reorganization of Stone Energy Corporation and its Debtor Affiliates was confirmed on February 15 2017 by a Texas bankruptcy court The firm an oil and natural gas exploration and production company announced in October 2016 that it would be entering a restructuring support agreement with senior noteholders with the stipulation that it would file for voluntary Chapter 11 Bankruptcy on or before December 9 2016 President and CEO of Stone Energy David Welch released this statement in conjunction with the October announcement of the restructuring deal The agreement with our Noteholders will provide value to all of our stakeholders improves our liquidity and better positions us to be profitable during a historically difficult time in our industry Importantly this agreement will allow all stakeholders to share in potential valuation growth if

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LOUISIANA NEWS AT A GLANCE commodity prices improve Following the restructuring the firm eliminated approximately 1 2 billion in outstanding debt with about 236 3 million in debt remaining 225 million of which is 7 50 percent senior second lien notes that are due in 2022 Part of the plan to repay pre petition holders of unsecured notes and stock includes the issuance of 20 million New Common Shares Unsecured notes holders will be receiving 19 million shares with stockholders receiving the remaining one million New Common Shares The shares began trading on the New York Stock Exchange on March 1 2017 under the ticker symbol SGY As per the plan the firm s previous board of directors saw their terms expire and a new board of seven members was appointed The new appointees include Neil P Goldman John Brad Juneau David Rainey Charles M Sledge James M Trimble David N Weinstein and David H Welch In addition the firm announced on February 27 that it had completed the sale of approximately 86 000 acres in Pennsylvania and West Virginia Appalachian regions The buying firm EQT Corporation paid 527 million in cash a portion of which will be used by Stone Energy Corp to fund its cash obligations as detailed in its restructuring deal The sale of these assets was part of the conditions the firm agreed to abide by Mounting Problems for Louisiana Oil Companies By Tim McNally The turbulence of the oilfield has been widespread over the past two years since OPEC decided to let the supply overcome the demand for oil thereby causing the price of oil to plummet As OPEC now attempts to move the price higher through the use of production cuts which occasionally includes members outside of OPEC such as Russia many producers within the U S have taken advantage of the temporary boost in price and extracted as much oil as possible Fortunately many of OPECs members have indicated they plan to continue the production cuts but that will probably only provoke companies within the United States to maximize their production This is one problem with regional production cuts When not all oil producers throughout the globe are participating in the cut it is very likely that those regions which are not part of an agreement will succumb to the temptation of a higher oil price and produce as much oil as possible This constant balancing act between the seemingly ever expanding supply and slowly growing demand prolongs the suffering of many states which rely on their oil producers to keep the state economy afloat One such state which is heavily reliant on its oil industry is Louisiana The constant struggle of the state s companies to produce oil at a reasonable profit has been made more difficult by the ongoing legal issues originating from the state which blame the producers for the decay of the wetlands in Louisiana The offshore drilling companies have been the focus of the legal matters which are the organizations that have struggled with continuing business in the gulf The expense of drilling offshore in the Gulf of Mexico and the inherent risk involved in such an operation are not yet seen as being covered by the current price of oil Until such a time as the oil price can surmount the costs monetary and otherwise involved with offshore drilling one should expect to see a continually low in the production of oil which originates offshore The most recent rig count from Baker Hughes marked Louisiana as maintaining the same number of rigs as the previous count which came in at 58 However compared to a year ago the number has risen by 13 from 45 rigs The steady growth of the oil price and the accompanying increase in rig counts do give the impression that the economic environment in improving However one should keep in mind the fact that U S oil producers increasing rig counts and increasing the amount of oil produced do have its adverse side effects Namely the supply and stockpile levels of oil will continue to be higher than the demand The United States saw a total increase of 13 rigs which pushed the total number of rigs in the U S to 870 Oilman Magazine May June 2017 OilmanMagazine com 31

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