The Bakken Magazine - September 2015

SEPTEMBER 2015

www.THEBAKKEN.comPrinted in USA

PlusHow Oil Prices Impact

Shale Real Estate Page 36

AND Oil’s Connection To

Eastern NDPage 8

Event Review: Updates, Insight From Big Names on Big IssuesPage 22

Answers For Industry

• amine reboilers• combustors• dehydrators• gas production units

• heated seperators• incinerators• line heaters• treaters

• amine reboilers• combustors• dehydrators• gas production units

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1 - 8 0 0 - 2 2 7- 8 1 5 9 \ \ Q M AT. C O M

5-ACRE MAT DRILL SITE

AFTER AFTER

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

ROCK drill site

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

MANUFACTURING SINCE 1974WORLDS LARGEST SUPPLIER

MAT drill site

THEBAKKEN.COM 5

CONTENTS SEPTEMBER 2015 VOLUME 3 ISSUE 9

6 Editor’s NoteBakken Information OverloadBY LUKE GEIVER

8 ND Petroleum CouncilBakken's Place In Red River Valley BY ROB LINDBERG

10 Events Calendar

Pg 36 INFRASTRUCTURE & CONSTRUCTION

Understanding the Shale Play Real Estate Portfolio

Mike Elliott travels to every major shale play hub in the U.S. weekly. We caught up with him to talk about the trends, rates and expectations present for commercial and industrial real estate linked to the Bakken during the current oil price environment. BY LUKE GEIVER

ON THE COVER: Industry leaders talked about oil prices, challenges and the future. David Williams, CEO of tribal-based Missouri River Resources talked about work on the reservation. PHOTO: THE BAKKEN MAGAZINE

NEWS12 The New Operator Message

14 Presidential Candidate Priorities

16 Grassroots Group Pushes To Extend The Ban

Pg 22 EVENT REVIEW

Exhibiting The Bakken’s Mood

Facts, figures and expert perspective shared at the unique three-day Bakken Conference & Expo event featuring producers, service firms and networking receptions.

BY PATRICK C. MILLER

The BAKKEN MAGAZINE SEPTEMBER 20156

Bakken Information Overload

Luke GeiverEditorThe Bakken [email protected]

EDITOR'S NOTE

For the Latest Industry News:www.TheBakken.comFollow us:

twitter.com/thebakkenmag facebook.com/TheBakkenMag

For this month’s issue, we had a layout logistics problem. Following the three-day Bakken event our team helped organize and produce content for, we were overwhelmed with story ideas, hard facts and unique perspective. Our embarrassment of riches included beautiful imagery, complex charted information and recordings of multiple conversations suitable for individual feature stories. As you know, regarding the Bakken, there is a lot to read, write and talk about, and spending three days with experts and executives from oil producing firms, mid-stream entities and service companies—established or startup—is a great situation to be in, at least until it’s time to condense that information into anything short of a Bak-ken documentary novel.

In “Exhibiting Bakken’s Mood,” on page 22, we wanted to capture the sentiment and takeaways from the July Bakken event held in Grand Forks, North Dakota. Pat-rick Miller accomplishes that in a special double feature ripe with images of speakers, lists of facts shared, charts explained and as the title indicates, moods felt about the state of the Bakken. His recap sheds light on several topics ranging from Continental Resource’s objective in fighting the U.S. crude oil export ban to future Bakken activity levels predicted by Houston-based energy analyst firms. The section on a multiwell pad project that suggests current setback limits in North Dakota are inappropriate was the topic of a blog written by our team the week after the event. If the print recap of the project generates anywhere near the interest it did online, I know our inboxes will be constantly dinging with requests for more information.

Mike Elliott, the main source in our look into shale play-based commercial and industrial real estate, is used to receiving requests for more information. His explana-tion of creating a shale play development timeline that compares one play to another was fascinating to learn about, and we’re confident everyone who picks up this issue will find it useful. Elliott also instilled confidence in us for the “Shale Play Real Estate” story simply by explaining his travel schedule to us––plus, we discovered our perspec-tive in that story was spot on. When Elliott told us that he’s more than likely in a differ-ent energy hub city—Houston, Calgary, Willison—every week to talk with clients and assess the market in each location, we knew we were lucky to have caught him between flights and to have had the chance to bring valuable insight to life in a story. Enjoy the overload of information this month.

THEBAKKEN.COM 7

www.THEBAKKEN.com

VOLUME 3 ISSUE 9

Subscriptions Subscriptions to The Bakken magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States. To subscribe, visit www.TheBakken.com or you can send your mailing address and payment (checks made out to BBI International) to: The Bakken magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or [email protected]. Advertising The Bakken magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about The Bakken magazine advertising opportunities, please contact us at 866-746-8385 or [email protected]. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to The Bakken magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to [email protected].

TM

Please recycle this magazine and remove inserts or samples before recycling

COPYRIGHT © 2015by BBI International

EDITORIAL

Editor Luke Geiver [email protected]

Staff Writer Patrick C. Miller [email protected]

Copy Editor Jan [email protected]

PUBLISHING & SALES

Chairman Mike Bryan [email protected]

CEO Joe Bryan [email protected]

President Tom Bryan [email protected]

Vice President of Operations Matthew Spoor [email protected]

Vice President of Content Tim Portz [email protected]

Marketing & Sales Director John Nelson [email protected]

Business Development Manager Bob Brown [email protected]

Account Manager Austin [email protected]

Circulation Manager Jessica Beaudry [email protected]

Traffic & Marketing Coordinator Marla DeFoe [email protected]

ART

Art Director Jaci Satterlund [email protected]

Graphic Designer Lindsey Noble [email protected]

ADVERTISER INDEX32 AE2S

14 Allied Oil & Gas Services, LLC

20 Bartlett & West

21 Braun Intertec

10 Clark-Reliance Corporation

27 Convey-All USA

24 Corval Group

25 Design Solutions & Integration

26 Dunlop Protective Footwear

31 Enerplus

33 Fortis Energy Services, Inc.

35 Granite Seed Company

42 iLevel Digital

16 ISCO Industries

17 Johnson Controls, Inc.

15 J-W Energy Company

40 KLJ

38 KW Commercial

43 Midwest Industrial Supply, Inc.

18 New Prospect Company

19 Presto Geosystems

2 Profire Energy, Inc.

3 Quality Mat Company

41 RDO Equipment Co.

11 Savage Services Corporation

39 SBG Energy Services LLC

30 Torrid Technologies Group

4 Tyco Fire Protection Products

34 United Piping, Inc.

44 Worthington Industries


NORTH DAKOTA PETROLEUM COUNCIL THE MESSAGE

A public event hosted by the North Dakota Petroleum Council and Bakken Backers will bring stakeholders in the oil and technology industries together, in Fargo, N.D., on Sept. 21.

The public event titled Bits + Bytes, will highlight how Red River Valley firms have found opportunities to grow their businesses in the Bakken and includes an education session for the public with the Bakken's leading experts. Attendees will gain insight on the latest trends and practices in the oil industry, what makes the Bakken one of the most prominent oil fields in the world, and how Fargo, Grand Forks and other regional entrepreneurs are building new companies because of it.

For two decades or more, the Red River Valley, anchored by North Dakota State Uni-versity and the University of North Dakota, has expanded its economy with targeted growth in technology, advanced manu-facturing and distribution. This strategy brought continual growth to the region before the Bakken and allowed its commu-nities to take immediate advan-tage of the oil formation when the pace of drilling soared in 2010. A number of these com-

panies utilized the Bakken to not only expand their business-es within North Dakota, but to also gain experience in the oil industry that allows the busi-nesses to expand into other oil and gas regions such as Colo-rado, Texas and Ohio.

Transformed StateAlthough the idea that the

Bakken has transformed North Dakota is widely known, the magnitude of its impact is not always recognized.

In the mid-2000's, North Dakota had progressed sub-stantially since the years when the state was pitched for the "Buffalo Commons." Yet, it was still known for outmigra-tion and ranked far in the lower half of all states for income and business activity. However, dis-coveries at that time by wildcat-ters exploring for oil only a few miles into Montana would am-plify North Dakota's economy to a level no one predicted.

Exploration quickly moved eastward toward the New Town and Parshall regions, an area where the world discovered the full potential of the Bakken and North Dakota's place in the world.

Because of the Bakken,

AG, OIL AND THE STATEWIDE CONNECTION: To showcase the link between the rig count of western North Dakota and places like Fargo, the North Dakota Petroleum Council's team will present case studies of businesses or entities that operate from Fargo, but work in the Bakken. PHOTO: THE BAKKEN MAGAZINE

Bakken’s Place In The Red River Valley By Rob Lindberg

THEBAKKEN.COM 9

NORTH DAKOTA PETROLEUM COUNCIL

North Dakota simply ignored the economic turmoil that plagued the rest of the country, including the state's neighbors. North Dakota has seen its place in the nation rise for average income from 38th to 6th. Birth rates have skyrocketed and the population went from worries about keeping young people in state, to becoming the youngest state in the nation and a state that is routinely regarded as one of the best states in the nation to start a career and family. The state worked very hard to do so, and with a little geological luck, it achieved what it had wanted for so many decades.

Widespread ImpactWhile the Bakken, located

in the northwest corner of our state, made the greatest impact in the cities of western North Dakota, the surge of oil activ-ity created a boon for the entire state.

The data shows it well. Across the state, more than 15 percent of all workers are em-ployed directly by the oil and gas industry. Thousands of people in and around Fargo and Grand Forks work directly in the oil industry; in fact, each city has 1 percent to 2.4 percent of its total employment within the oil and gas industry, despite being 250 miles or more away from the nearest well. These num-bers do not include the types of companies mentioned here that provide products and services to the oil and gas industry. In total, more than 80,000 workers in North Dakota owe their job

to the Bakken and $43 billion of economic impact is gener-ated by the young oil field.

More than the data, we see it too. Technology firms are writing software that make operations in the Bakken more efficient. Students are choos-ing skilled trades and graduat-ing to find six-figure jobs. Steel fabricators added people and acquired new locations while their national and regional com-petitors shrunk by roughly 60 percent. Imagine rebuilding Jamestown and Grand Forks in four years. Eastern North Da-kota engineering and construc-tion companies flocked to the western side of the state to help communities grow double, tri-ple, and, in Watford City's case, eight times their original size.

About Bits + BytesSome companies benefit-

ing from the Bakken are not widely known; others are local leaders applying their experi-ence to opportunities in the Bakken with new, innovative products and services. Each company, however, has an in-teresting story to tell about how they hooked onto the one-in-a-lifetime opportunity that is the Bakken to create a company of long-term value.

Tammy Miller, CEO of Border States Electric and host of Bits + Bytes, will open the event by sharing the story of BSE's rapid expansion to be-come one of the largest busi-nesses headquartered in the Valley, in part because of op-portunities it found in oil and

gas regions across the United States. Miller will moderate an innovation panel with Jake Joraanstad, founder of mo-bile app maker Myriad Mobile, Glenn Mitzel from systems in-tegrator JDP Automation and AE2S's Jason Sanden on the company's development of sys-tems to monitor pipeline flows. Tom Kenville will present how the oil industry has taken inter-est in UAS technologies in the Red River Valley to solve needs in western North Dakota.

In addition to learning how local companies work in the Bakken, attendees will hear the latest from three of the Bakken's most knowledgeable leaders: Kathy Neset, president of Neset Consulting Services; Lynn Helms, director of the North Dakota Department of Mineral Resources; and Gene Veeder, executive director of the McKenzie County Job De-velopment Authority. The three presenters will discuss the basic geology and technologies of the Bakken, the effects of the slowdown, and what lies ahead in the Bakken.

Long-Time OpportunityToday, fewer than 10,000

wells have been drilled in the Bakken, far fewer than the 60,000 or more wells oil pro-ducers will drill in this forma-tion over the next three decades. New well costs continue to fall and oil companies have devel-oped new techniques that have grown new well production 25 to 50 percent in only the past 12 to 18 months.

The oil industry is here to stay and these companies hold a positive long-term outlook on the Bakken. The price per barrel might be down, but production has held steady. At the same time, homes, apartments, re-tail, and industrial construction continue to boom. We are see-ing life and business normalize in the Bakken. For those who planned from the beginning to build long-term, well-managed businesses, the future is very bright.

Bits + Bytes celebrates the Red River Valley's opportunity to not simply take part in the largest reserve of crude oil in the continental United States, but to do so according to its own strategic growth and with its unique expertise. The public is invited to learn more about the basics of the oil and gas industry while hearing the im-pressive growth stories of these local businesses.

Author: Rob Lindberg Director, Bakken [email protected]

EVENTS CALENDAR

The Bakken magazine will be distributed at the following events:

2015 North Dakota Petroleum Conference Annual MeetingSeptember 21-23, 2015Fargo, North DakotaIssue: September 2015The Bakken magazine

OilCommNovember 4-6, 2015Houston, TexasIssue: November 2015The Bakken magazine

Houston Oilfield ExpoDecember 9-10, 2015Houston, TexasIssue: December 2015The Bakken magazine

NAPE DenverDecember 9-10, 2015Denver, ColoradoIssue: December 2015The Bakken magazine

The Bakken Conference & Expo July 25-27, 2016 Grand Forks, North DakotaIssue: July 2016The Bakken magazine

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BAKKEN NEWS BAKKEN NEWS & TRENDS

Operator Themes

Operators Push New Message

For Bakken-linked oil producers, the play has entered an unfamiliar stage. With historic oil price swings happening for most of the summer, producers have had to navigate the current commodity price environment by choosing when, if or how to drill new wells or complete those already drilled using pricing information that could change weekly. The producer community has shown many approaches and pushed many different mes-sages during the second quarter reporting period, all of which have combined to yield loosely connected themes. A select few producers is sufficient enough to highlight the main messages and approaches now being deployed during this new stage of activity in the Bakken.

8-Rig ProgramThree of the largest-by-vol-

ume Bakken producers—Whiting Petroleum Corp., Hess Corp., Continental Resources Inc.—operated the second quarter (or are now doing so) with eight drilling rigs. For each operator, the eight-rig operation model is a rig decrease from what each respectively set-out to run at the start of the year.

Price Determining Production

EOG Resources, Abraxas Petroleum and Triangle Petro-leum USA agree on when to ramp up Bakken production ef-forts. Each entity has made it clear it will not drill or complete new wells until commodity prices be-gin to trade higher. For Triangle’s President and CEO Jon Samuels, oil trading above $60 will entice

the Denver-based operator to commence drilling new wells. Oil trading in the $50 to $60/b range will cause the team to “dig in and do some work,” he said.

“Many of you are asking, when will EOG grow oil again? We have said all along that we do not intend to grow production until we see the oil market balanc-ing,” said Bill Thomas, chairman and CEO of EOG Resources.

San Antonio-based operator Abraxas Petroleum is similar to Triangle and EOG on its philoso-phy of drilled but uncompleted wells. All three operators are com-fortable deferring the completion of its wells until prices recover in 2016. Triangle has 18 gross wells drilled but yet to be completed. EOG’s total grew in the second quarter and it said it will continue to have a high number of DUCs until prices recover. Bob Watson,

president of Abraxas, said that although it is frustrating that his team shut in three offset wells during the drilling and planned completion of three other wells that have been deferred into 2016, his team is committed to operating with DUCs until prices recover.

Cashflow BoundariesWhen Continental Resources

updated its 2015 guidance by reducing its capital spending plan by roughly $300 million to $350 million, the operator cited a new ideal common among many pro-ducers. “While we do not believe today’s low commodity prices are sustainable long term, we are committed to living within cash flow until they recover,” said Har-old Hamm, chairman and CEO. “We are reducing capital expendi-tures to protect our balance sheet

WHITING PETROLEUM CORP: 135,835 net bopd and 7,541 future drilling locations.

CONTINENTAL RESOURCES: 140,988 bopd, 10 years of drilling inventory (running 15 rig per year)

ABRAXAS PETROLEUM: 5,000 net acres, purchased/own walking drill rigTRIANGLE PETROLEUM USA:

79,000 net core acres and 13,000 bopd. 20 years of low risk inventory development.

8-RIG PROGRAMCASHFLOW BOUNDARIES

RELIANCE ON TECH EFFICIENCY GAINS

PRICE DETERMINING PRODUCTION

EOG RESOURCES: Williston Basin net drillable locations recently increased from 580 to 1,540

THEBAKKEN.COM 13

BAKKEN NEWS

and to preserve the value of our world-class assets until commod-ity prices improve.”

Like Continental, Triangle’s team is committed to maintain-ing the health of its balance sheet during sub-$60 oil. Triangle has dropped its lone rig and sug-gested it will wait on completing wells. The company has already achieved the midpoint of its pro-jected 2015 production estimates for daily production. “With our asset base, production is simply a matter of spend,” Samuels said, in his explanation of the company’s potential to grow production.

James Volker, president and CEO of Whiting, told inves-tors that his company will now operate within discretionary cash flow for the remainder of 2015 and into 2016 as long as oil prices continue to trade at current prices.

Reliance on Tech, Efficiency Gains

Almost every Bakken opera-tor has continued its stance on the importance of finding efficien-cies. Most second-quarter mes-sages contained at least some note of an operator’s work to lower lease hold expenses or find new equipment set-ups that will make a field operation more efficient. The Abraxas team has already said it will invest in new equip-ment and processes. Triangle’s energy services division—Rock-Pile Energy Services LLC—will try to maintain its presence in the fracking service portion of the industry due to what it said are indicators showing a strong future economic opportunity. Accord-ing to Triangle, current frack crews are down significantly and offering services for unsustainable prices. Coupled with the fact that

some are foregoing maintenance on equipment to save money, a return of higher prices will pres-ent an opportunity to frack crews and services that can maintain a strong relationship with current and future clients.

Whiting will continue to rely on the strength of its geology team in Denver to drive decisions during this current downturn in activity. The company deploys what it calls the stiletto heel drill-ing approach. The approach has led to what it calls the holy grail. Because Whiting has added scan-ning electroscopic microscopes to its Denver facilities, wells drilled in new locations can be drilled first vertically and then horizontally. According to Volker, Whiting can drill a vertical well, ship the core to Colorado where it will be slabbed out by Weatherford and then sent to Denver. In Denver,

the geology team will work 24/7 to determine which places the drilling team should target for the horizontal.

WHITING PETROLEUM CORP: 135,835 net bopd and 7,541 future drilling locations.

CONTINENTAL RESOURCES: 140,988 bopd, 10 years of drilling inventory (running 15 rig per year)

ABRAXAS PETROLEUM: 5,000 net acres, purchased/own walking drill rigTRIANGLE PETROLEUM USA:

79,000 net core acres and 13,000 bopd. 20 years of low risk inventory development.

8-RIG PROGRAMCASHFLOW BOUNDARIES

RELIANCE ON TECH EFFICIENCY GAINS

PRICE DETERMINING PRODUCTION

EOG RESOURCES: Williston Basin net drillable locations recently increased from 580 to 1,540

BAKKEN NEWS

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C e m e n t i n g & A c i d i z i n g S e r v i c e s

The oil and gas industry is showing in-creased interest in using small unmanned aerial systems (SUAS) for tasks such as surveying and infrastructure inspection.

The ability to obtain an exemption from the Federal Aviation Administration for the commercial use of sUAS is attracting the inter-est of industry and other businesses related to energy production in North Dakota, according to Todd Madeen, survey account manager for RDO Integrated Controls.

“As more exemptions go through, it’s getting more popular—it’s snowballing, it’s gaining speed,” said Mike Schmaltz, account manager for RDOIC, which has been a sUAS dealer for two years.

Madeen said RDOIC is talking with crude producers in the Bakken shale play

about using sUAS in their operations and is receiving a great deal of interest.

RDOIC and SenseFly Ltd. were at the Bakken Conference and Expo in Grand Forks to show the oil and gas industry how small unmanned aerial systems can benefit the busi-ness.

Based in Bismarck, North Dakota,

RDOIC currently sells the SenseFly fixed-wing eBee unmanned aerial vehicle (UAV) and the company’s new eXom quadcopter.

Adam Zylka, SenseFly technical support engineer, attended the conference trade show with RDOIC to show the sUAS platforms and answer questions about the company’s products.

Unmanned aerial vehicles coming to ND energy industry

UP IN THE AIR: The eBee unmanned aerial vehicle produced by SenseFly and sold by RDO Integrated Controls is best used for aerial mapping. PHOTO: THE BAKKEN MAGAZINE

“With the eBee, SenseFly, currently has the second most exemptions in the U.S., just behind DJI,” Zylka said. “In terms of map-ping and surveying exemptions, we’re leading in the U.S.”

He notes that the eBee and eXom are

complimentary mapping platforms. The fixed-wing eBee is best used for horizontal mapping and covering large areas up to 250 to 300 acres per flight to create 3D terrain models, Zylka explained.

The eXom is better suited for conducting close inspections of vertical surfaces, such as the underside of a bridge or other infrastruc-ture.

“It can be used to follow a pipeline with a thermal camera to see where potential leaks and hotspots are,” Zylka said. “It’s a higher resolution for close-in mapping.”

As part of its service, RDOIC provides training to its customers and works with SenseFly to help them obtain a commercial exemption from the FAA.

BAKKEN NEWS

NEW KID ON THE BLOCK: SenseFly recently released the eXcom, a quadcopter UAV used for inspections of vertical surfaces. PHOTO: THE BAKKEN MAGAZINE

SHOWING OFF UAS: RDO Integrated Controls exhibited its unmanned aerial vehicles at the Bakken Conference & Expo in July. From the left are Adam Zylka of SenseFly, and Mike Schmaltz and Todd Madeen of RDOIC.PHOTO: THE BAKKEN MAGAZINE

BAKKEN NEWS

ONEOK Bakken Pipeline LLC is plan-ning to construct and operate a 4-mile long, 8-inch NGL pipeline in McKenzie County under a siting permit approved by the North Dakota Public Service Commission.

Expected to come online in Decem-ber this year, the Lonesome Creek Pipeline will have a maximum capacity of 30,000 barrels per day with an estimated capacity of approximately 15,000 barrels per day. The pipeline will carry a mixture of ethane, propane, butanes, iso-butane mix, pentanes and natural gas produced at the Lonesome Creek Gas Plant.

ONEOK said during a PSC hearing on the $6 million project that there is a need for the pipeline to transport materials out of the

Lonesome Creek Gas Plant, a 200-million-cubic-foot-per-day facility also expected to come online in December. The pipeline will start at the ONEOK Lonesome Creek Gas Plant in McKenzie County and will end at a connecting point with ONEOK’s Garden Creek Pipeline southwest of Arnegard.

“This is another small but valuable piece of infrastructure to support the capture and

processing of gas and the use of this valu-able energy resource,” said Julie Fedorchak, PSC chair. “I particularly appreciate the efforts made by the company to colocate the pipeline with another line and to consolidate the associated reclamation.”

PSC approves siting permit for NGL pipeline in McKenzie County

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The impact of North Dakota’s rig re-duction could finally leave on mark on the state’s oil production figures, said Justin Kringstad, director of the North Dakota Pipeline Authority. This summer, Krings-tad developed a recorded webinar detailing elements of production in the Bakken.

Although oil production between January and June 2015 fluctuated, oil prices were not the driving factor. Winter and spring weather conditions along with drilling decision made in 2014 were the reason for the production ups and downs.

To Kringstad, June through the end of the year will reveal the impact of the state’s rig count. “The second half of 2015 is when we are going to see and feel this reduction the most,” he said. It re-mains to be seen if higher producing wells drilled and completed in the core of the Bakken will offset the decreased number of rigs.

And, drilled but uncompleted wells that could be brought online at any time—and add to the production total—act as a wild card. Operators have the ability to “cherry pick” certain DUCs if neces-sary. “Those wells that in this basket of uncompleted are, for the most part, well-positioned to be in the production mix,” he said. A real production decline may not be visible in the Bakken for up to two and a half years either, he added.

Kringstad’s role of tracking oil movement has not gotten any easier, he also said. Determining the method of oil transportation preferred by producers or midstreams is difficult.

Factors in predicting production, oil transport

TRACKING OIL TRANSPORT IS HARD TO DO: - Future oil production is uncertain.- Market conditions are shifting.- Project commitments of pipe and rail companies are unknown.- Regulation of pipe, rail, exports, etc. is uncertain.


BAKKEN NEWS

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Lifting the crude export ban may not be beneficial to the U.S. or gasoline prices, believes a new grassroots group led by a progressive talk radio fixture and a career political communicator. Karl Frisch, executive director of Allied Progress, is leading the group’s efforts to continue the U.S. ban on crude oil exports.

“For 40 years, the crude oil export ban has mostly forbidden big oil companies from shipping American crude oil to other countries. The policy has protected American consumers, kept good-paying refinery jobs here in the U.S. and set America on a path toward energy indepen-dence,” the group said.

Repealing the ban would pad the bottom line of oil companies already bringing in billions of dollars in profit each year, the group also said. Allied Progess has released a full ad campaign, including television commercials. The group is supported by the United Steelworkers and Consumers and Refiners United for Domestic Energy Coalition.

Although the group has received support thus far, the reports and government-related entities tasked with studying the debate are mount-ing in favor of lifting the ban. The U.S. Energy Information Administra-tion, at the request of Congress and the White House, has worked on studying the ban. Recently, EIA produced a report that indicated lifting

the ban would not increase the price of gasoline for American consum-ers. “Petroleum product prices in the United States, including gasoline prices, would either be unchanged or slightly reduced by the removal of current restrictions on crude oil exports. The 58-page report also said that as Brent crude prices decreased with more U.S.-based West Texas Intermediate crude hitting the market, “there would likely be a some-what greater positive effect on domestic production.”

Allied Progress group favors maintaining export ban

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90

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history projec�ons

Brent Crude oil price projections by case with current crude oil export restrictions, 2010-'152013 DOLLARS PER BARREL

SOURCES: U.S. Energy Information Administration, National Energy Modeling System Reference, Low Oil Price, High Oil and Gas Resource, and High Oil and Gas Resource/Low Oil Price cases, with current crude oil export restrictions. Note: Projections from National Energy Modeling System.

THEBAKKEN.COM 19

BAKKEN NEWS

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The Vote4Energy campaign run by the American Petroleum Institute is urging Repub-lican and Democrat presidential candidates to focus on energy policy during the upcoming 2016 campaign.

“We’re calling on candidates—Republican and Democrat alike—to share with voters their vision for harnessing this American energy moment,” says Jack Gerard, API president and CEO. “And we’re asking debate moderators and political pundits to raise important ques-tions about America’s energy future.”

The Vote4Energy campaign is encourag-ing presidential candidates from both parties to address such issues as ending the 1970s ban on crude exports, a policy Gerard says is driven by “an era of scarcity, dependence and uncer-

tainty.” The organization also favors a more efficient onshore permitting process, faster approval of energy infrastructure projects and a market-determined scope for LNG exports.

Gerard says that in the past 10 years, the energy industry has undergone a transforma-tional shift brought about by hydraulic fractur-ing and horizontal drilling, as well as refinery capacity expansions and efficiencies. But he says the Obama administration’s policies are aimed at restraining energy production.

“This surging American production has marginalized the ability of other nations to dictate prices and created vast new economic opportunities for U.S. workers and consum-ers,” Gerard says.

He criticized administration policies such as the U.S. Environmental Protection Agency’s new ozone standards, new limits on refinery emissions, the Bureau of Land Management’s hydraulic fracturing rule, the Bureau of Safety and Environmental Enforcement’s blow-out preventer rule, and increasing ethanol mandates under the Renewable Fuel Standard.

“Make no mis-take—America’s role as an energy superpower is not

ensured,” Gerard says. “We’ve seen the mission creep of federal agencies on full display under this administration. Thousands of pages of new roadblocks and mandates are making their way through the regulatory pipeline.”

Gerard says Congress has rejected the Obama administration’s approach of restruc-turing the U.S. energy economy.

“They are selecting specific winners and losers, and by driving that, the ultimate loser is the American consumer,” he noted. “It’s very clear they have made an ideological choice to pick what they have as their preferred energy sources, and it’s not entirely by environmental issues.”

API says energy policy should be presidential candidate priority


BAKKEN NEWS

Schlumberger to buy Cameron for $14.8 billionTo form the first-ever

pore-to-pipeline product and service provider in the oil and gas industry, Sch-lumberger Ltd will spend $14.8 billion. The globally recognized reservoir and well servicing entity with locations in the North Dakota communities of Williston and Minot, has started the acquisition pro-cess of Cameron, a surface technology provider that has expertise in wellhead servicing and flow manage-ment.

The acquisition comes less than a year after Paal Kibsgaard, Schlumberger’s

chairman and CEO, called on the exploration and pro-duction industry to change its view on the industry in light of low oil prices and work to become more ef-ficient in planning, drilling and completing uncon-ventional wells. The new company—operating under the Schlumberger name—will be able to provide cost savings to custom-ers through supply chain performance. None of the services offered by either entity overlap.

Schlumberger’s revenue base will increase by 20 percent through the pur-

chase that is expected to be complete in 2016. “With oil prices now at lower levels, oilfield service companies that deliver innovative technology and greater integration while improv-ing efficiency—which our customers increasingly de-mand—will outperform the market,” Kibsgaard said.

Schlumberger put a 37 percent premium on Cameron’s average price per share and a 56 percent pre-mium to Cameron’s most recent closing stock price of $42.47 per share. COMPANY ADDITION: Schulmberger Ltd. has

North Dakota locations in Williston and Minot. In June 2014, the company called on E&Ps to rethink how they go about developing oil and gas resources.PHOTO: THE BAKKEN MAGAZINE

THEBAKKEN.COM 21

BENEFITS OF THE BUY: Cameron provides surface technology and flow infrastructure to the Bakken from its Minot, North Dakota, locationPHOTO: THE BAKKEN MAGAZINE

Seeing Through to the End

The Science You Build On.

BAKKEN NEWS


EVENT REVIEW

INDUSTRY OUTLOOK: Brandon Elliott with Northern Oil & Gas speaks during the industry roundtable. To his left are Kathy Neset of Neset Consulting Service and Luke Geiver, editor of The Bakken magazine. On the right is Dan Eberhart of Canary Wellhead.PHOTO: THE BAKKEN MAGAZINE

For three days, experts, producers and decision makers offered valuable perspective on the state of the Bakken at the Bakken Conference & Expo.By Patrick C. Miller

THE BAKKENExhibiting

MOOD

Exhibiting The Bakken'sMOODIf there was one word used

the most by presenters during the three-day Bakken Conference & Expo at the Alerus Center in Grand Forks July 25-27, it was probably efficiency. From drill-ing to fracking to transportation to the processes used to run daily op-erations, there was information—and the data to back it up—on how to lower costs by being more efficient in the Bakken.

Nearly 550 attendees and 87 exhibitors took part in the three-day event that began with a special session on infrastructure called “The Bak-ken’s Backbone,” which focused on infrastructure issues important to the Bakken, including: rail, pipeline, water, gas processing, fleet transportation, power and commercial construction. During the two days that followed,

presenters and panels were included that ranged from how national energy policy impacts Bakken production to which type of proppant works best to increase production efficiency.

The Bakken’s BackboneWatford City mayor Brent San-

ford delivered the keynote address during the first day’s infrastructure seminar. He outlined a brief history of the city’s growth, noting that its has a strategic importance through community expansion. From 2010 to 2015, Watford City has borrowed more than $300 million for projects that include a $54 million high school; a $92 million community events cen-ter; a $30 million wastewater plant; a $27 million special improvements dis-trict; a $58 million hospital and clinic; a $50 million county law enforcement

THEBAKKEN.COM 23

EVENT REVIEW

EVENT REVIEW

center; a $10 million apartment complex; and a $5 million day care center.

Dean Bangsund, research scientist with North Dakota State University’s agribusiness and ap-plied economics department, provided information on the Bak-ken’s economic impact on North Dakota and the future economic outlook. For example, in 2013, he said $28.7 billion in oil and gas sales resulted in $5 billion in min-eral royalties, $4 billion of which were private mineral ownership royalties.

A panel on rail infrastructure and transload facilities in west-ern North Dakota featured Dave Thomson, CEO, New Frontier LLC, and principal with Engi-neered Rail Solutions LLC, who discussed finding efficiencies through rail. Neil Amondson, co-

founder of Northstar Transload-ing, spoke on developing a Bakken transload mega-site.

North Dakota Public Service Commission Chair Julie Fedor-chak briefed attendees on oil and gas infrastructure projects regu-lated by the commission. She said North Dakota’s current pipeline crude export capacity is 827,000 barrels per day (bpd). By 2017, it’s projected to increase to 1.5 million bpd and reach 1.86 million bpd by 2020.

Commercial construction and property valuation was the subject of a panel moderated by Luke Geiver, editor of The Bakken magazine. Speakers included Mike Dunn, business development manager, Construction Engineers, and Mike Elliott, managing princi-pal, Energy Real Estate Solutions. Dunn noted that his company is

contracted to construct the new Watford City jail, a $52 million project scheduled for completion in 2017.

Dale Niezwaag, senior legis-lative representative at Basin Elec-tric Power Cooperative, a genera-tion and transmission cooperative with a service area spanning nine states, is working to meet electrical demands in western North Dako-ta. The cooperative forecasts that its electrical load will grow another 2,828 megawatts by 2035, with 1,850 megawatts of that growth occurring in the Williston Basin.

“The big part of the Bakken play is the clash of how to meet needs of the cultures from the oil side to the utility side,” said Niez-waag. “Sixty-five percent of all our growth is going to be in the Bak-ken, so it is a major part of our business and a major part of our

focus is making sure we have low cost power to get to people work-ing in the area.”

The afternoon session in-cluded a presentation by Lyle Jensen, president of American Power Group, who detailed his company’s efforts to use its dual-fuel technology in the Bakken. It enables trucks to operate on a combination of diesel fuel and clean-burning CNG, offering the advantages of decreasing flared gas, reducing diesel emissions and higher operating efficiencies for trucks.

The impact of the Bakken’s growth on aviation was covered by Chris DeCrescente, general man-ager of the Tioga Aero Center. He noted that from 2009 to 2014, there was a 46 percent increase in direct airport management em-ployment; a 70 percent increase

THEBAKKEN.COM 25

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HIGH-TECH EXHIBIT: Doug Penniston, regional account executive with Verizon Networkfleet, demonstrates the company's mapping software in the Alerus Center's exhibit hall. PHOTO: THE BAKKEN MAGAZINE

EVENT REVIEW

in people arriving in general avia-tion aircraft; a 61 percent increase in visitors arriving on commercial airlines; and a 150 percent increase in state and federal funding for the state’s airports.

Tim Brown, senior vice presi-dent, MBI Energy Services, spoke on the company’s efforts to devel-op and use a world-class oil train-ing facility. MBI has experienced 800 percent growth since 1979 and has 2,000 employees in mul-tiple locations. It partnered with Diamond B Technology Solutions to develop and launch a certificate-tracking solution to improve the administration and management of all training certification.

In a presentation on water infrastructure serving the oil and gas industry, Steve Burian, CEO of AE2S and its affiliated com-panies, reviewed the challenges

of supplying water to municipal, rural and industrial users in west-ern North Dakota. He said that in 2013, the state’s oil and gas in-dustry accounted for 5 percent of the state’s consumptive water use, with irrigation using 54 percent, municipal water 20 percent, indus-try and power 16 percent and ru-ral water 4 percent. Of the nearly 30,000-acre feet of water used by oil and gas operations in 2014, 73 percent came from surface water sources and 27 percent came from groundwater sources.

Monday’s session ended with a special presentation titled, “Bak-ken Workforce Update,” which covered employment trends, chal-lenges and opportunities for busi-nesses in the Bakken. The panel included Cheri Giesen, executive director, Job Service North Dak-toa; Michael Ziesch, manager of

The BAKKEN MAGAZINE SEPTEMBER 201526Dunlop_201505_OGM_03_USA_v10.indd 1 18-06-15 23:47

PROPPANT FRACKONOMICS: Ceramic proppants from Saint-Gobain Proppants, a 350-year-old French company, are displayed by Tiahana Fuss-Dezellic, global marketing manager. PHOTO: THE BAKKEN MAGAZINE

EVENT REVIEW

the Labor Market Information Center, Job Service North Dakota; Nancy Hodur, research assistant professor at the NDSU Agribusiness and Applied Economics Department; and Patrick Bertagnolli, hu-man resource director at B&G Oilfield Services.

Despite the low price commodity, Giesen said, “We still have 60 people a day coming into our Williston office to get help finding a job.”

Ziesch said North Dakota’s oil and gas industry represents nearly 17 percent of the state’s total private employment with 7.4 percent in drilling, extraction, production and refining; 2.9 percent in infrastructure development; 1.7 percent in professional services; 3 percent in trans-portation; and 1.7 percent in wholesale and manufacturing.

“We’ve seen the workforce shift from jobs in manufacturing to the healthcare

and service providing side of the econo-my,” said Ziesch. "Our first (significant) change we expect to see is on the earnings side, rather than the employment side."

Hodur discussed preliminary results she’s obtained through a workforce sur-vey of oil and gas employees. To date, her survey has more than 1,400 observations with 14 firms representing roughly 7,640 employees. Hodur said among those in-terviewed for her survey, most said hous-ing continued to be the number-one issue because there’s not enough and it’s too expensive.

Bertagnolli outlined B&G’s efforts to retain quality employees during difficult times for oilfield services companies. Em-ployee education, an emphasis on safety training, noting positive accomplishments, good benefits and community involve-ment are some of the steps B&G has taken with its employees, he said.

THEBAKKEN.COM 27

EVENT REVIEW

SCIENCE PROJECT FINDINGS: Heath Mireles, manager of resources development for Continental Resources, presented the scientific findings of research on the company's Hawkinson Unit through the EERC's Bakken Optimization Program. PHOTO: THE BAKKEN MAGAZINE

Upstream, Midstream PerspectiveOn the second day of the Bakken Con-

ference and Expo, attendees heard from the Williston Basin’s largest producer—Continen-tal Resource Inc.—about why it’s crucial to the Bakken and other shale plays to end the U.S. ban on crude exports. There was also big news about the largest construction project ever pro-posed for North Dakota, the Badlands NGL polyethylene plant which will use Bakken-pro-duced ethane.

Keynote speaker Gary Gould, Continen-tal’s senior vice president of operations, said OPEC’s manipulation of global crude prices and its predatory pricing program is trying to drive tight, light oil out of business. He made the case for ending the “archaic” U.S. export ban policy to become energy independent, help American allies, lower gasoline prices for consumers and become the world’s swing oil producer.

Gould said that since the policy against ex-porting U.S. crude was established in the 1970s, the U.S. has gone from oil scarcity to abun-dance, which has caused oil imports to drop 70 to 80 percent. Over the past 10 years, U.S. pro-duction has doubled and has represented nearly 40 percent of the world’s growth. In contrast, OPEC production increased just 3 percent in the same time period and other countries grew only 1.5 percent.

“The United States has the resource, the people and the technology. So we’re in a very good place as a country,” Gould said. “There’s lots of good news here.”

He referenced OPEC statements indi-

cating the organization’s intention to control world oil prices by attempting to shut down light, tight crude from U.S. shale.

“Nobody wants $200 oil, and we don’t want $50 oil, either,” he said.

continued on page 30...


INFORMATION PLEASE: Nearly 550 people attended the three-day Bakken Conference & Expo at the Alerus Center in Grand Forks, North Dakota, July 25-27.PHOTO: THE BAKKEN MAGAZINE

EVENT REVIEW

1 Continental’s Hawkinson Project—in partner-ship with the EERC’s Bakken Optimization Pro-gram—drilled and completed 11 wells on a single unit from one pilot hole at a cost of $92 million for drilling and completions and $14 million for gathering and analysis of scientific data. Among the study’s findings were that 200-foot heel/toe setbacks result in uncaptured resources and that 50-foot setbacks would lead to greater recovery.—Heath Mireles, northern region resource develop-ment manager, Continental Resources Inc.

2 North Dakota’s current pipeline crude export ca-pacity is 827,000 barrels per day (BPD). By 2017, it’s projected to increase to 1.5 million BPD and reach 1.86 million BPD by 2020. – Julie Fedorchak, chair, North Dakota Public Service Commission.

3 From 2010 to 2015, Watford City has borrowed more than $300 million for projects that include a $54 million high school; a $92 million community events center; a $30 million wastewater plant; a $27 million special improvements district; a $58 million hospital and clinic; a $50 million county law enforcement center; a $10 million apartment complex; and a $5 million day care center.—Brent Sanford, mayor, Watford City

4 North Dakota’s oil and gas industry represents nearly 17 percent of the state’s total private em-ployment with 7.4 percent in drilling, extraction, production and refining; 2.9 percent in infrastruc-ture development; 1.7 percent in professional ser-vices; 3 percent in transportation; and 1.7 percent in wholesale and manufacturing.—Michael Ziesch, manager, Labor Market Information Center, Job Service North Dakota

FACTOIDS FROM BAKKEN CONFERENCE PRESENTATIONSFrom The Show

THEBAKKEN.COM 29

EVENT REVIEW

5 According to a North Dakota State University study on the economic impact of the oil and gas industry on North Dakota for 2013, $28.7 billion in oil and gas sales resulted in $5 billion in mineral royalties, $4 billion of which were private mineral ownership royalties.—Dean Bangsund, Department of Agribusiness and Applied Economics, NDSU

6 In 2006, the average lateral length was 6,167 feet for a Bakken well with 9,925 barrels as the av-erage fracturing fluid volume. In 2014, the average lateral length was 9,719 with an average fracturing fluid volume 89,747 barrels. Also in 2014, the total volume of fracturing fluid for Bakken wells was approximately 179 billion barrels.—John Harju, associate director for research, University of North Dakota Energy & Environmental Research Center

7 Wells waiting on completion has helped drive the success of North Dakota’s gas capture program. Statewide, 82 percent of gas is being captured rather than flared. The next target is an 85 percent gas capture rate by January 2016.—Alison Ritter, public information officer, North Department of Mineral Resources

8 From 2010 to 2014, traffic increased 26 percent on all North Dakota highways and 71 percent in the oil-impacted counties. The state’s Department of Transportation has received $2.26 billion in funding for road projects in the 2015-2017 bien-nium with $1.44 billion designated for projects in western North Dakota.—Grant Levi, director, North Dakota Department of Transportation

9 The highest IPs and declines in the Bakken shale play are in the Nesson Anticline sub-play because of mature, over-pressured and naturally fractured shales around the geologic structure. Sub-plays neighboring the Nesson Anticline have mature shales and are also over- pressured. These sub-plays exhibit high IP rates, but shallower declines than along the Nesson Anticline.—Jonathan Garrett, principal analyst, Wood Mackenzie Ltd.

10 Saint-Gobain Proppants, headquartered in France, was started in 1665, making the company 350 years old.—Tihana Fuss-Dezelic, global market-ing manager, Saint-Gobain Proppants


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EVENT REVIEW

Gould said there is growing bipartisan sup-port for Congress to pass legislation to end the crude export ban. He urged the audience mem-bers to contact their elected representatives to support such measures.

William Gilliam, CEO of Badlands NGL LLC, used the conference as an opportunity to announce that the company’s massive construc-tion project has grown from $4 billion to $6.5 billion. When crude prices return to the $70 per barrel level, he said, “We think with that we can

build 2 million ton ethane cracker in North Da-kota. We will have something world-scale—or perhaps bigger—in North Dakota.”

Last year, Gilliam and North Dakota Gov. Jack Dalrymple announced Badlands NGL’s plan to build a polyethylene plant in North Da-kota that would use ethane from the Bakken to produce consumer and industrial plastics, as well as other byproducts such as hydrogen, ni-trogen, CO2, propane and propylene.

Gilliam explained how the market poten-

tial was so great that the company was now planning to build two plants. The first plant will be smaller and constructed within three years in the continental U.S. at a site that’s been selected, but Gilliam referred to only as “Shangri-La.”

Gilliam said Badlands NGL is close to selecting a site for its North Dakota plant and construction would begin as soon as binding agreements are signed. Although building the North Dakota plant is complicated by weath-er, transportation and workforce problems, Gilliam said a North Dakota polyethylene facility is closer to U.S. and Asian markets. In addition, it provides less expensive and faster rail and shipping transport options.

John Harju, associate director for strate-gic partnerships at the University of North Dakota Energy & Environmental Research Center, provided a look back at the techno-logical changes and people who helped make the Bakken a world-class oil play.

Allison Ritter, public information of-ficer with the state Department of Mineral Resources gave a rundown on regulatory changes from the last legislative session that include pipelines, flaring and oil condition-ing. She said North Dakota needs to com-plete an average of 115 wells per month to retain production of 1.1 million barrels per day and thus far is averaging 120 completions per month.

David Williams, CEO of Missouri River Resources discussed efforts to get into the oil production business on the Fort Berthold Reservation and plans to further expand. He also covered the workforce development project started at New Town.

“Someone has to take the baton and move the play and industry forward,” Wil-liams said. “We felt there’s a great need for this.”

Geiver moderated a wide-ranging indus-try roundtable that included geologist Kathy Neset, owner of Neset Consulting Service; Brandon Elliott, executive vice president of corporate development and strategy for Northern Oil and Gas Inc.; and Dan Eber-hart, Canary Wellhead CEO.

Eberhart said that in the current low-price environment, the Bakken “has played

THEBAKKEN.COM 31

EVENT REVIEW

with one hand tied behind its back compared to other shale plays” because of lack of peo-ple and infrastructure. However, he believes that the play will emerge stronger and be “the biggest winner” because the state is taking the correct approach to fix problems during the downturn.

Neset admitted that the slowdown in drilling activity has hurt her company, but that it is becoming more efficient and keep-ing employees busy—even if it means hav-ing them wash windows and do landscaping rather than outsourcing work.

“We’re being efficient, being effective and showing the rest of the world the stan-dard America goes by,” she said. “We have a choice as to how we deal with it.”

Elliot provided the non-operator per-spective on investment trends in the Bakken. He said that initially with oil prices falling, there was a flush of capital leaving North Da-kota that shifted to other shale plays where costs were lower and returns were higher. But time has shown that the core areas of the Bakken remain profitable and provide good opportunities for those who understand it.

“The downturn will give this basin the opportunity to show why it was such an excit-ing place to discover,” Elliot said.

Geiver asked each member of the panel what it is that people outside of the Bakken didn’t know about the play or perhaps mis-understood.

“I think there’s slowly becoming a re-alization that we do have a core of this play that’s economic to very low WTI prices—and that’s with service costs only coming down 15 or so percent,” Elliott said. “When we get a little bit more service cost relief and we get the engineering and geology side focusing on completion designs and recoveries, we’ve got some tight curves and we’ve got some areas in this play that are clearly very profitable.”

Neset said, “I hear so many miscon-ceptions about what the Bakken is, what the Three Forks is, how we’re going about it, and I think it’s so important that we continue to work on that perspective because—like it or not—we do need the support of the general public in understanding what this energy in-dustry is.”

In Eberhart’s view, “The thing that will help the Bakken the most is if in this difficult time we can get some infrastructure improve-ments in place and get some more takeaway ca-pacity in place and really close some of that gap between the cost structure of the Permian and the Eagle Ford and the Bakken. I think that’s in the Bakken’s best interest. That will help it to grow over time and become even more impor-tant in the U.S. energy picture.”

The afternoon session opened with an in-

depth look at Continental’s Hawkinson Project which—in partnership with the EERC’s Bak-ken Optimization Program—drilled and com-pleted 11 wells on a single unit from one pilot hole at a cost of $92 million for drilling and completions and $14 million for gathering and analysis of scientific data.

Project results were presented by Harju and Heath Mireles, manager of resources de-velopment, Continental Resources. According to Harju, in 2006, the average lateral length was


PERATIONS AE2

S

EVENT REVIEW

KEEP ON TRUCKIN': The crew from Bert's Truck Equipment Inc. poses with their display in the exhibit hall. Bert's sponsored the Tuesday Evening Bash during the Expo.PHOTO: THE BAKKEN MAGAZINE

6,167 feet for a Bakken well with 9,925 barrels as the average frac-turing fluid volume. In 2014, the average lateral length was 9,719 with an average fracturing fluid volume 89,747 barrels. Also in 2014, the total volume of fractur-ing fluid for Bakken wells was ap-proximately 179 billion barrels.

Mireles said that studying the Hawkinson Project showed that 200-foot heel/toe setbacks result in uncaptured resources and that 50-foot setbacks would lead

to greater recovery. He provided a video rendering detailing the study’s results. The idea behind the “science project” is to give Continental and other operators in the Williston Basin a better understanding of the appropriate well pad design, spacing between laterals and how several geologic formations react to certain frack-ing designs.

Based on the results, Mireles believes the data is strong enough to change the way the North Da-

kota portion of the Williston Ba-sin is developed. He proposes that the state should place its setbacks (the space minimum a well bore must be from the spacing unit's in-visible boundary) at 50 feet. Doing so, could increase oil production in a given spacing unit by up to 10 percent.

Dave Johnson, director of total environmental management systems with Nuverra Environ-mental Solutions Inc., described operations at the company’s new

Terrafficient Processing Facility at Watford City. The process turns wet drill cuttings into an “earth friendly” product that can be used for applications such as road bas-es, gravel additives, construction fill and flowable fill. Johnson not-ed that the process also recovers water and hydrocarbons for reuse while reducing carbon emissions.

Bilu Cherian, director of reservoir engineering with Sanjel, continued the afternoon’s explora-tion and production theme with a

THEBAKKEN.COM 33

EVENT REVIEW

presentation on well completions in the Bakken. He was followed by a panel on the future of hy-draulic fracturing which included presentations by Hema Prapoo, senior account manager with Al-lied-Horizontal Wireline Services; Jeremy Dockter, co-founder and managing direction of Expan-sion Energy; Mahmoud Asadi, director of oil and gas technology for Praxair Services Inc.; and Dax Cornelius, CEO of Torrid Tech-nologies Group.

Hesham El-Rewini, dean of the UND College of Engineer-ing and Mines, ended the second day with a presentation on the school’s petroleum engineering program. Enrollment in the pro-gram has grown from four un-dergraduate students in the fall of 2010 to 300 students in the spring of 2015, including 31 females and 13 graduate students.

Day three of the conference got underway with Grant Levi, director of the North Dakota Department of Transportation (DOT), who described the tre-mendous growth the state has

experienced in agriculture, manu-facturing and energy, which has resulted in record population and a 29 percent increase in employ-ment.

According to Levi, from 2010 to 2014, traffic increased 26 percent on all North Dakota highways and 71 percent in the oil-impacted counties. The state DOT has received $2.26 billion in funding for road projects in the 2015-2017 biennium with $1.44 billion designated for projects in western North Dakota.

Levi outlined work on major road projects such as the four-laning of U.S. 85 between Wat-ford City and Williston and truck bypass relief routes for Watford City, Alexander, New Town, Dickinson, Williston and Killdeer totaling more than $350 million in construction. He said total costs for North Dakota’s 2015 construction season would be ap-proximately $807 million.

Focused Experts Explain Williston Basin

Bakken operations in a low-

oil-price environment was the focus of a presentation by Jona-than Garrett, principal analyst and Bakken expert with Wood Mack-enzie Ltd. Although the firm ex-pects U.S. onshore production to flatten and Bakken rig counts to significantly decline, Garrett said North Dakota’s production is ex-pected to hold steady at near 1.2 million barrels per day through-out 2015 and 2016.

Low oil prices have caused producers to concentrate opera-tions in the Bakken’s “sweet spot,” which has enabled drilling to con-tinue. Garrett said more than 95 percent of rigs in the Bakken dur-ing April 2015 were focused on the higher return sub-plays of the Bakken and Three Forks forma-tions.

According to Garrett, the highest IPs and declines in the Bakken shale play are in the Nes-son Anticline sub-play because of mature, over-pressured and naturally fractured shales around the geologic structure. Sub-plays neighboring the Nesson Anticline have mature shales and are also

BAKKEN EXPERTISE: Wood Mackenzie's Bakken expert, Jonathan Garrett, described how oil producers are coping with the low-price environment.PHOTO: THE BAKKEN MAGAZINE


EVENT REVIEW

Projected Future Fracturing and Maintenance Water Needs

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Fracturing andMaintenance Water -Scenario 1

Fracturing andMaintenance Water -Scenario 2

FRACK FUTURES: In his conference presentation, John Harju with the UND EERC outlined trends based on the evolving optimization needs of the Bakken play. SOURCE: UND ENERGY & ENVIRONMENTAL RESEARCH CENTER

over-pressured. These sub-plays exhibit high IP rates, but shallower declines than along the Nesson Anticline, he said.

With perhaps one of the most atten-tion-getting titles of the conference “Prop-pant Frackonomics in the Bakken,” Tihana Fuss-Dezelic, global marketing manager with Saint-Gobain Proppants, discussed how to select a proppant that’s technically, environ-mentally and economically sound. She also noted that French-based Saint-Gobain has been in existence for 350 years. Her presenta-tion covered the purpose of proppants and the company’s research on the differences be-tween sand, bauxite and ceramic proppants.

Jed Tallman, manager of U.S. market development for Ferus CNG provided an overview of how the company is turning flared gas into CNG to power operations. He noted that the process can result in diesel cost reductions of 20 to 40 percent, reduces flaring, lowers emissions of particulate matter and greenhouse gases, and reduces NOx and Sox emissions.

A panel titled “Finding Oilfield Ef-ficiencies” included four representatives from three companies who described how to improve operations through automation, repairing and restoring parts and optimizing well operations through a better understand-ing of flow measurements. The presenters were Ken Olexa, general manager, and Ryan Bacon, project development team lead, with JDP Automation Inc.; Dale Wietzema, sales manager with Gremada Industries—AIM Machining; and Nicholas Sikes, account man-ager with Emerson Process Management.

As expected, flaring was a hot topic at the conference, and a panel of four experts discussed the latest advancements in gas pro-cessing technology. Audrey Mascarenhas, president and CEO of Questor Technology covered power generation and treating pro-duced water using flared gas. Mike Mayers, corporate business development manager with Aggreko, described the company’s tech-nology, which uses stranded Bakken-associat-ed gas for temporary power production. Leo Eskin, president of LPP Combustion LLC focused on how LPP’s unique flex-fuel power system turns flared gas into electricity. Russell Goss, territory manager for Caterpillar Oil &

THEBAKKEN.COM 35

EVENT REVIEW

Trusted commercial intelligence © Wood Mackenzie

13

Impact of completions pace on production growth � The Bakken needs an estimated 100 completions per

month to keep production flat over 2015. An average number of monthly completions between Q4 2014 and Q2 2015 of 110 wells per month will allow Bakken production to continue to grow at a modest rate this year

Operators will begin to trim well backlogs in 2H 2015

North Dakota uncompleted well backlog � With oil prices low, the uncompleted well backlog in North

Dakota has grown as operators wait on further service cost reductions and a rebound in prices

� Winter weather at the beginning of 2015 also greatly impacted the pace of well completions in ND which further enlarged the backlog

0

100

200

300

400

500

600

700

800

900

1000

0

50

100

150

200

250

300

Uncom

pleted well backlog

Mon

thly

ND

wel

l com

plet

ions

Completions Uncompleted wells

Source: Wood Mackenzie, NDIC

-

200

400

600

800

1,000

1,200

1,400

1,600

000'

s b/

d

Base Decline 50 Completions/Month

100 Completions/Month 150 Completions/Month

Source: Wood Mackenzie

COMPLETIONS VS. PRODUCTION: Data provided by Jonathan Garrett of Wood Mackenzie shows how many wells must be completed per month to maintain current Bakken production levels.SOURCE: WOOD MACKENZIE

Gas, highlighted the company’s flare-to-pow-er success stories.

To close out the conference, Geiver moderated a panel on environmental issues that included waste handling, remediation, preventative strategies and environmental law enforcement. Kurt Rhea, general manager of SECURE Energy Services on-site ser-vices division, provided a regulatory update on TENORM (technologically enhanced naturally occurring radioactive material) and discussed disposal and treatment options for it. Wes Dickhut, senior geotechnical engineer with Braun Intertec, showed how the com-pany designs stable well site pads in difficult, remote locations, as well as how to repair them when slides occur.

Jeff Martinez, special agent in charge of the Denver office of the U.S. Environmen-tal Protection Agency’s Criminal Enforce-ment Program, outlined the conditions under which the EPA pursues charges for environ-mental crimes. He said the program’s mission is to investigate and refer for prosecution the most significant and egregious violators of environmental laws that pose the greatest threat to human health and the environment.

The environmental impacts of oil and gas activities on groundwater are frequently in the news. Joel Galloway, associate direc-tor of the U.S. Geological Survey’s North Dakota Water Science Center, presented the results of a USGS groundwater study in the Williston Basin. Randomly sampled water from 34 wells found no indication that energy development activities affected groundwater quality in the upper Fort Union Formation, according to Galloway.

Although many conference speakers acknowledged the challenges ahead until oil prices rebound, the number of potential so-lutions available to improve efficiencies and lower costs—combined with the increasing level of knowledge of the Bakken formation and the evolution of technologies that will assist in capturing a larger quantity of the en-ergy resource—the overall mood was upbeat and positive.

Author: Patrick C. MillerStaff Writer, The Bakken [email protected]


INFRASTRUCTURE & CONSTRUCTION

TIMELINE DEVELOPMENT: Energy Real Estate Solutions has created a timeline of shale plays to compare one play to another. IMAGE: ENERGY REAL ESTATE SOLUTIONS

STAGE 1Land,

Cars/Trailers, Parking Lots

& Man Camps

STAGE 3Hotels & Start

of Industrial Buildings

STAGE 5Single Family

& Retail

STAGE 2Mobile Homes

& MotelsSTAGE 4

Multi-familySTAGE 6Office

Buildings

Life Cycle of a Shale PlayDeveloper Demand and Supply

THEBAKKEN.COM 37

Oil price impact and trends present in the modern day shale play property landscape.By Luke Geiver

SHALE PLAY REAL ESTATE Understanding the Portfolio

Mike Elliott is fully aware that he could be in a different shale city every week, talking to commercial real estate clients looking to buy, sell, build or move. In 2014, Elliott

founded Energy Real Estate Solu-tions, a unique, shale-play fo-

cused firm with headquarters in Denver. “We knew from

Denver we were only a flight away from ev-

ery major energy city,” he says.

In only one year, Elliott’s team has es-

tablished four divisions: commercial brokerage,

property management, facil-ity management and project (con-

struction) management. “We are really the only company that focuses on the energy sector like this,” he says. In the Bakken, ERES already holds roughly 85 percent share of the industrial market.

To understand what he has learned through his travels from Calgary to Williston to Houston, we spoke with Elliott for perspective on commercial construction and real estate in the Bak-ken and beyond. Elliott has insight on how oil prices will or have impacted the markets he serves, along with future op-portunities, elements of the market that may surprise and how the life cycle of the modern-day shale play has evolved.

Founded On ShaleFor 25 years, Elliott has worked in

the institutional real estate industry, cre-ating lease packages, negotiating prop-erty management plans and building commercial offerings. When he started ERES after leading other major institu-tional real estate brands, he knew what he wanted for his approach and for his team. “People in our company have a background in real estate and the energy markets. It is hard to find people in both markets,” he says.

Before helping to start ERES, El-liott and his other founding members knew that markets like that of the Bak-ken or the Eagle Ford were new and for major companies it would be hard to entrench themselves there. In most cases, they didn’t have a back office to manage the area properly. “There are a lot of companies that will fly in once in a while for a specific tenant or client but they don’t have boots on the ground. We have that, we have boots on the ground in the Bakken,” he said. ERES’ physi-cal presence in the Bakken—they have a Williston office—isn’t the only strong point that links the team to energy ser-vice clients, banks and investors looking to do business.

ERES has created and now offers investors and potential clients an un-derstanding, or timeline, explaining the lifecycle of a shale play. “Ever since the

beginning of this recent surge in the Bakken and other markets, we have al-ways got people who are investors or users that are asking us how one mar-ket compares to another,” he says. “We started doing some research to look at what it looked like.”

The team developed a timeline that outlines the stages of a shale play, like that of the Bakken or Eagle Ford. Re-cently, ERES updated its timeline, ex-plaining to where each major U.S. shale play has arrived at. The timeline consists of six different stages, and, according to the ERES research team, each of the seven major plays in the U.S. are in dif-ferent time period stages. The Bakken has just surpassed stage 4, and begun to meet the needs of those interested in multifamily housing. The play has al-ready gone through stage one: campers, cars and mancamps; past stage two: mo-bile homes and hotels; through stage 3: hotels and industrial buildings, and now into stage 4.

“It has been pretty helpful to get people to understand how one shale play compares to another,” Elliott says. The updated timeline shows where the Bakken stands in relation to other plays developed status. For investors in par-ticular, it helps to show them how one play compares to another, especially if they understand a certain play. “If you can show investors opportunities and


STAGE 6Office

Buildings



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how they compare to something they are familiar with,” he says, “they get pretty ex-cited.”

How Oil Prices Impact Shale Real Estate

Armed with the timeline tool and the data on housing vacancies, commercial lease rate averages and more, Elliott has

much to share about the Bakken’s current state in the context of low oil. “What we notice in the Bakken, or any of these shale plays, is that real estate is a lagging indica-tor to oil and gas prices. A lot of energy companies expect a big decrease in real estate, but the fact of the matter is there haven’t been.”

According to ERES, the lack of price

Oil prices lag throughout 2015-2016 Oil prices rebound before end of 2016Debt market not available; equity will dry up Large construction projects resumeAll cash required to close development deals Demand increasesMost private equity companies looking for opportunistic plays Speculative developers to return to the marketSignificant consolidation in the energy sector Debt and equity markets bounce backLand sales come to a complete halt Real estate world is happy

IMPACT ON THE ENERGY REAL ESTATE INDUSTRYTWO SCENARIOS

SOURCE: ENERGY REAL ESTATE SOLUTIONS

decline stems from simple supply and demand. In the Bakken, vacancy rate for commercial industrial real estate is still below 2 percent. And, because other primary or secondary real estate markets are starting to pick back up, speculative developers once focused on the Bakken are moving back to traditional markets. “That is keeping the leasing rates the highest in the country,” he says. Also, as mergers and acquisitions happen, many think real estate space will be freed up. But, the ERES team says they see a surge in real estate activity when M&A activity heats up because expanded entities need expanded space.

Some elements of the industrial real estate scene have changed because of oil prices and activity slow down. Many energy companies are now outsourcing their energy real estate work. “They don’t want to play in the real estate role,” he says. They no longer want to manage, work to develop or sell existing assets. “It’s not their core business.”

Low oil prices have decreased the demand for land as developers have left for other markets, Elliott says. Leasing terms have also decreased. Up until six months ago, lease terms were typically for 10 years. Now, they are for five years. Land prices for commercial and residen-tial sectors have decreased in the Bakken and the supply of zoned property is now out pacing demand, ERES data shows. Elliott believes it could be a good time for longer-term investors to buy land, but believes there is no current incentive to overpay.

THEBAKKEN.COM 39

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STAGE 1Land,

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& Man Camps

STAGE 3Hotels & Start

of Industrial Buildings

STAGE 5Single Family

& Retail

STAGE 2Mobile Homes

& MotelsSTAGE 4

Multi-familySTAGE 6Office

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UPDATE! Life Cycle of a Shale PlayDeveloper Demand and Supply

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On the residential real estate side, ERES believes that man camps and large scale employee housing demand is diminishing due to a shift to multi-family offerings. There could be a good buying opportunity for investors look-ing to purchase existing product as overbuilding may occur while vacancy may increase if oil prices continue to keep new well drilling activity stalled.

Through its client meetings and shale play life cycle updates, Elliott says his team is trying to get people to un-derstand that much of the mayhem once linked to the Bak-ken has passed. He also wants people to know that good or bad, much of the activity in the Bakken and the resulting real estate needs, is tied to oil prices. However, Elliott’s team has confidence in itself. With offices planned or un-der construction in Calgary and Houston, the life cycle of ERES is in need of update. “We are pretty bullish on the future,” Elliott says. “Our whole entire business is based on the energy market so we wouldn’t be doing this if we weren’t.”

Author: Luke GeiverEditor, The Bakken [email protected]

‘What we notice in the Bakken, or any of these shale

plays, is that real estate is a lagging indicator to oil and gas prices. A lot of energy

companies expect a big decrease in real estate, but

the fact of the matter is there haven’t been.’

Mike Elliott, Managing Principal, Energy Real Estate Solutions


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Documents

The Bakken Magazine - September 2015