l GOVERNMENT Feeling the crunch Frack fightl MOVING HYDROCARBONSl MOVING HYDROCARBONSVol. 3, No. 51 † Publication of record for the Bakken oil and gas industry Week of April 5, 2015

l M O V I N G H Y D R O C A R B O N S


Vol. 3, No. 51 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of April 5, 2015 • $2.50

Feeling the crunch

A number of idled drill rigs sit on a lot in northwest Stark County,North Dakota in February as Bakken operators cut back on welldrilling. Crashing crude oil prices are impacting everyone in theBakken in some form, including Petroleum News Bakken, which istemporarily going to a biweekly schedule (see story below).

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page3

MT Senate leader: A rancher’sperspective from oil country

Tightening rail regsFour US Senators propose crude oil volatility limits and older tank car ban

By MAXINE HERRFor Petroleum News Bakken

Crude hauled by rail would be

banned from older tank cars and

required to meet volatility limits if a bill

introduced by four U.S. senators is

passed.

Introduced as legislation “to protect

the public, communities across America,

and the environment by increasing the

safety of crude oil transportation by railroad,”

Sens. Maria Cantwell and Patty Murray of

Washington, Tammy Baldwin of Wisconsin and

Dianne Feinstein of California feel the bill is nec-

essary since the federal rail standards

drafted by the U.S. Pipeline and

Hazardous Materials Safety

Administration that are being reviewed

by the White House do not include

volatility concerns of crude shipped by

rail. The Obama administration is con-

sidering mandates for stronger tank cars

and pressure relief valves that would

allow the gases to escape if heat builds

up around the rail car. Senate bill S. 859

would require PHMSA to draft additional stan-

dards for volatility of gases in crude oil shipped

by train.

MARIA CANTWELL

see RAIL REGS page 15

Too long, heavy and fastCanadian National’s board lays ‘deteriorating’ safety record blame on CEO

By GARY PARKFor Petroleum News Bakken

Quarter after quarter for several

years, Canadian National

Railway’s Chief Executive Officer

Claude Mongeau took pride in pointing

to the steadily improving safety record

of his company and its 22,000 employ-

ees.

Not so much anymore for a company

that proclaims itself as “North America’s rail-

road.”

In fact, the boss has just felt a rap over his

knuckles as a result of “deterioration” in CN’s

safety record in 2014.

His bonus was capped after mainline

derailments climbed to 57, up 73 percent

from 2013.

That trend has extended into 2015,

with two fiery derailments by crude

trains in northern Ontario.

The tally was well above the 2009-13

average of 39 accidents per year across a

network that covers 21,000 miles, with

at least 27 of the derailments in Canada

blamed on track problems, compared with the

previous annual average of 14.

The performance has prompted Transport

CLAUDE MONGEAU

see SAFETY RECORD page 14

Frack fightNorth Dakota joins forces with Wyoming to stop BLM fracturing rule


North Dakota has joined forces with

Wyoming to combat new federal hydraulic

fracturing rules.

Secretary of the Interior Sally Jewell

announced new hydraulic fracturing rules March

20 that would require companies that drill for oil

and natural gas on federal lands to disclose chem-

icals used in their operations, and gives the Bureau

of Land Management authority over the supply

and disposal of water used in fracturing opera-

tions.

The rule has been under consideration for near-

PNB shifts to biweekly scheduleFor months now, Petroleum News Bakken has been report-

ing on the collapse in global crude oil prices and the resulting

fallout throughout the Bakken play ― E&P companies across

the board cutting back on spending,

drillers laying down rigs, service sector

layoffs, lower state government tax rev-

enues and on it goes. And in the ups and

downs of the oil and gas industry, nobody

involved in the business is immune from

the effects of a bust cycle ― including

Petroleum News Bakken. While sub-

scriptions certainly make up a portion of

our revenue, like any newspaper, adver-

tising is our bread and butter and in the

current depressed oil market we have seen our ad revenues fall.

When we first began publishing Petroleum News Bakken in

April 2012, it was published on a biweekly basis and remained

on that schedule until we went weekly in March 2013. In light

of the current business environment we are returning, albeit

Samson Resources considersChapter 11 in dealing with debt

Tulsa-based Samson Resources is considering filing

Chapter 11 bankruptcy if it cannot repay its debt in the low

commodity price environment.

In a Securities Exchange Commission filing on March 31,

the oil operator said it is evaluating its options to address

debt and liquidity issues, and bankruptcy protection “may

provide the most expeditious manner” for capital. Samson

said it had $4.2 billion of debt and just over $220 million in

cash on hand at the end of February.

The company has opted to cease all drilling operations

and is selling its non-core assets company-wide, which

includes some within the Bakken. Samson has prepared

packages for sale in several of its plays but has not received

acceptable bids or terms to move forward other than its

Arkoma Basin assets in Oklahoma and Arkansas, which it

sold for $48 million.

“But let me be clear, however, the sale of these assets will

not fix our capital structure. These sales are targeted toward

having a cleaner, more focused asset base upon which to

build the company,” Chief Executive Officer and Director

Randy Limbacher said.

He said once inventory within the Bakken and East Texas

can be restarted, it will provide the “anchor assets” for the

MIKE ELLERD

see NEW SCHEDULE page 14

see FRACK FIGHT page 16

New BLM rule attackedfrom numerous fronts

North Dakota’s litigation against the U.S.

Bureau of Land Management over new

hydraulic fracturing rules comes on the heels of

industry groups and Wyoming filing lawsuits.

The Wyoming government’s filing shoots

several holes in BLM’s rule, saying the rule

violates the Federal Land Policy and

Management Act and Mineral Leasing Act.

First, Wyoming said the rule conflicts with the

FLPMA which does not allow for a separate

see BLM RULE page 16

see SAMSON RESOURCES page 15

http://www.petroleumnewsbakken.com

2 PETROLEUM NEWS BAKKEN • WEEK OF APRIL 5, 2015

Petroleum News Bakkencontents

4 Montana kills tax trigger legislation

5 NDTL cancels scheduled online oil and gas lease auction

LAND & LEASING

MOVING HYDROCARBONS4 BNSF rolls out new safety plans

North Dakota governor applauds railroad for enhancingcrude-by-rail safety including lower speeds, better cars and more monitoring

GOVERNMENT3 Leading from the heart of oil country

Montana’s Senate majority leader assesses oil and gas-related issues from both legislativeand oil-country rancher perspectives

6 A family tradition

Slawson carries a long, rich history of Bakken exploration

BAKKEN EXPLORERS PREVIEW

BAKKEN STATS

COMPANY UPDATE

7 QEP puts 3 common-pad wells on IP list, 1 on top

7 Brent and WTI prices & spread, March 26-April 1

7 Bakken producers’ stock prices

5 PetroShale in growth mode after strategic acquisitions

5 Falling rail volumes hit Canexus

6 Saturn probes Saskatchewan plays

8 IPs for ND Bakken wells, March 24-30

9 North Dakota oil permit activity, March 24-30

10 ND weekly county permit totals, March 24-30

10 Top 10 Bakken wells by IP rate, March 24-30

11 Troubles grow at Canada’s Legacy

PNB shifts to biweekly schedule

Samson Resources considers Chapter 11 in dealing with debt

ON THE COVERFrack fight

North Dakota joins forces with Wyomingto stop BLM fracturing rule

Too long, heavy and fast

Canadian National’s board lays ‘deteriorating’safety record blame on CEO

Tightening rail regs

Four US Senators propose crude oil volatility limits and older tank car ban

SIDEBAR, Page 1: New BLM rule attacked from numerous fronts

Know your message is found in the right hands.

To advertise in Petroleum News Bakken, call907.522.9469 or visit PetroleumNewsBakken.com

www.PetroleumNewsBakken.com

KNOWWHAT HASHAPPENED, AND YOUWILL KNOWWHAT WILLHAPPEN.

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By MIKE ELLERDPetroleum News Bakken

In just the second session of his first

term in the Montana Senate, Glendive

rancher Matt Rosendale was elected as

majority leader by his colleagues follow-

ing an unsuccessful run for the state’s

lone congressional seat in the 2014 mid-

term elections. Rosendale’s district

encompasses all of Richland County as

well as Dawson and Wibaux counties

which are seeing some of the state’s

highest oil and gas activity. Rosendale

shared his views with Petroleum News

Bakken on the major oil and gas issues

the Montana Legislature faces as it

moves in to the last third of the session.

Greater sage grousePetroleum News Bakken: It looks like

everybody is behind Montana’s proposedsage grouse management program thatis working its way through theLegislature, but many don’t like the ideaof the state being forced to deal with afederal wildlife issue. What are yourthoughts on the issue?

Rosendale: This is an absolute classic

example of why I ran for Congress —

our big expensive problems come from

Washington, D.C., not from Helena. And

this is just a classic example of a depart-

ment — U.S. Fish and Wildlife Service

— expanding powers through the

Endangered Species Act. And it’s costing

areas of the country billions of dollars,

but it’s not being shared equally across

the entire nation. And until the people in

this nation have to share this expense

equally, then it’s going to continue. This

is a complete violation of property rights

and the constitution. It is a takings. It’s

wrong. It’s flat out blackmail from the

federal government, and it’s wrong.

Petroleum News Bakken: Are youconfident the program will avoid a list-ing of the species or is that risk stilllooming out there?

Rosendale: Oh that risk is still loom-

ing out there. Waiting for U.S. Fish and

Wildlife Service to make a decision is no

different that when we’re here (in ses-

sion) — everything is alive until we

leave and nothing is actually a law until

it’s signed by the secretary of state. So

as long as the U.S. Fish and Wildlife

Service is authorized by the United

States Congress, then we are at risk of

having that sage grouse listed.

Petroleum News Bakken: So it’s a riskworth taking?

Rosendale: It’s all we have. It’s a risk

we have to take.

Keystone XLPetroleum News Bakken: The

Keystone XL pipeline would run rightthrough your district. How do you feelabout that project?

Rosendale: I testified in support of

Keystone when they had the national

hearings several years ago. Dawson

Community College at Glendive was

one of the sites. I did some research

before I did testify, and I can’t give you

all of the exact facts, but what I can tell

you is that’s going to be one of the, if

not the safest pipelines in the country.

The next thing is from an economic

standpoint. It’s going to be a really big

boost to the economy as it’s being con-

structed. That’s the

short-term —

you’re going to

have all of the con-

struction. And then

you’re going to

have the folks that

actually maintain it

and operate it. And

then you’re going

to have the addi-

tional upgrade of the electricity grid and

there’s going to be some additional elec-

trical generation produced that’s going to

help reduce the rates for the folks that

are on that grid right now.

And then we’re also going to have an

onramp for 100,000 barrels a day down

in Baker and everything into or out of

Montana is freight — everything. So if

you can improve that flow, then you’re

going to improve the price our producers

get, whether you’re talking about wheat

or cattle or oil. If we have the ability to

get it out of the state easier, it’s going to

improve their price.

It’s also an incredible, long-term

boost to the tax base. When you start

looking at the counties it’s going to trav-

el through, most of them are extremely

rural and their tax base is dramatically

reduced anyway, and this is going to be

a big, big boost to their economy.

Petroleum NewsBakken: Do you think any-thing might happen on theproject in the last twoyears of the Obamaadministration?

Rosendale: That I can’t answer. I

would be taking just an absolute wild

guess. And that is one of the reasons

Sen. Webb (Roger Webb, R-Billings)

brought forth a compact (SB 314)

because if we can get a compact together

with several other states and Canada —

it does not require the president’s signa-

ture and Congress can approve it. So we

may just take care of it with our phone

and our pen.

Pipeline safetyPetroleum News Bakken: You intro-

duced Senate Bill 368, which requiresthe Department of Environmental

Quality to compile andmake available to the pub-lic a variety of constructionand operational informa-tion on pipelines that inter-sect or cross navigable

rivers in Montana. Was that in responseto the Poplar Pipeline breach under theYellowstone River near Glendive inJanuary?

Rosendale: That’s very interesting.

l G O V E R N M E N T

Leading from the heart of oil countryMontana’s Senate majority leader assesses oil and gas-related issues from both legislative and oil-country rancher perspectives

PETROLEUM NEWS BAKKEN • WEEK OF APRIL 5, 2015 3

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A s federal and state governments are

aiming for greater rail safety rules

and practices (see related story on page 1),

the U.S. rail industry is joining the efforts.

BNSF Railway Executive Chairman Matt

Rose informed the company’s customers

on March 27 about plans to implement

improved rail safety.

The additional safety measures involve

new operating procedures for crude trains

including reduced speeds. Crude oil trains

will slow to 35 miles per hour through all

communities with populations at or above

100,000. BNSF will also rid itself of the

older DOT-111 tank cars for crude oil serv-

ice within one year. They will be replaced

with next-generation tank cars

and CPC-1232 tank cars that will

be modified to meet pending fed-

eral regulations.

North Dakota Gov. Jack

Dalrymple told Petroleum News

Bakken March 24 that new fed-

eral tank car safety standards and

regulations would likely be

announced in May, two months

later than anticipated. During a

conference call with U.S. Transportation

Secretary Anthony Foxx, Dalrymple urged

him to issue new tank car construction

standards as soon as possible.

“Railroad operations, equipment and

maintenance are critical elements in our

overall goal to improve rail safety, and I

commend BNSF for taking these signifi-

cant steps,” Dalrymple said in a

March 27 statement following a

recent conference call with Rose.

“At the same time, we must

move forward on other important

aspects of rail safety including

the need for new federal tank car

standards and greater pipeline

capacity.”

Monitoring and inspectionsBNSF also plans to enhance electronic

monitoring programs on its rail cars and

increase track inspections. The monitors

are expected to more quickly detect repair

needs on tank cars. Rose said BNSF will

immediately remove any tank cars with

possible defects. The company has com-

mitted to spending $335 million on track

maintenance and capital improvement

projects in North Dakota in 2015. As

reported in Petroleum News Bakken’s

March 29 edition, Dalrymple said prevent-

ing crude by rail accidents starts with well-

maintained train tracks.

“Keeping the trains on the tracks is

clearly the single most important thing that

there is,” he said. “The state of North

Dakota is looking into its own inspection

programs because there’s a lot more at

stake there now.”

The state’s Public Service Commission

has proposed a $1.4 million railroad safety

program to enhance track inspections as

well as a pipeline integrity program that

would complement federal oversight in

North Dakota. It would fund three posi-

tions for enhanced railroad track inspec-

tions in the state along with three other

positions to inspect pipelines that transport

crude oil to market.

Several state agencies are also studying

a variety of current rail safety issues in

North Dakota, including a comprehensive

assessment of the state’s overall rail sys-

tem, railroad crossing safety, train speeds

and emergency preparedness, according to

a statement from Dalrymple’s office.

Minnesota on boardNorth Dakota’s eastern neighbor is also

proposing railway safety as crude trains

rumble along Minnesota rail lines.

Minnesota Gov. Mark Dayton has a plan to

invest $330 million over the next 10 years

to construct safer railroad crossings across

the state and fund major grade separations

in select cities. It would also provide better

emergency training and fund a new rail

office director position to address freight

rail service and safety issues. If passed by

lawmakers, it would also provide $45 mil-


BNSF rolls out new safety plansNorth Dakota governor applauds railroad for enhancing crude-by-rail safety including lower speeds, better cars and more monitoring


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GOVERNMENTMontana kills tax trigger legislation

The Montana Senate has killed a bill that would have put a trigger on the state’s

extraction tax “holiday.”

Senate Bill 374 would have allowed reduced production tax rates on oil and

natural gas production only when the oil and gas prices fell below specified levels

for a given calendar quarter. For oil, that trigger price was set at $52.59 per barrel

for West Texas Intermediate, and for gas the trigger was $5 per million British

thermal units.

The bill was tabled in the Senate Taxation Committee on March 25. However,

a motion to reconsider the bill was brought before the full Senate on March 30 but

failed on a 21-28 vote.

According to the Montana Petroleum Association, testimony against the bill

during the March 25 committee hearing included representatives from

Continental Resources, MDU Resources (parent company of Fidelity Exploration

and Production), Oasis Petroleum and SM Energy in addition to MPA’s testimony.

When asked about the bill in an interview with Petroleum News Bakken on

March 24, Senate Majority Leader Matt Rosendale noted that the state’s rig count

was standing around three. “If we go in and start passing legislation like that right

now, I don’t see that as a way to attract and capture additional productivity in

Montana. And apparently neither does the rest of the Legislature.”

—MIKE ELLERD

JACK DALRYMPLE

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lion each year for cities, counties and town-

ships to fund 75 local rail infrastructure

improvement projects by modernizing

property taxes paid by railroads.

“Over the last year, I have traveled

across Minnesota and seen firsthand the

very serious and costly challenges that

increased rail traffic have thrust upon our

communities,” Dayton said in a March 13

statement. “Minnesotans did not cause

these disruptions; they are not responsible

for the endless barrage of dangerous cargo

being shipped through their communities

every day. The railroads responsible for

these problems have a responsibility to pay

for these essential safety improvements.” l

continued from page 4

SAFETY PLANS

COMPANY UPDATEFalling rail volumes hit Canexus

Unable to find a buyer for its crude-by-rail terminal near Edmonton and falling

about 50 percent short of its targeted train movements, while watching its shares

flounder at the lower end of the 52-week price range, Canexus Corp. has resorted to

sharp cuts in its operations.

Announcing March 30 that it has “significantly” reduced its payroll affecting 16

percent of the staff at its Calgary head office and Bruderheim terminal, Canexus esti-

mated the move will generate savings of up to C$6 million a year, excluding severance

costs.

Canexus, once seen as a pacesetter in the movement of crude by rail, has been

caught in the same bind as other companies that have scaled back on what they regard

as unprofitable shipments of crude from Alberta to the U.S. Gulf Coast, including

Canadian Pacific Railway which has cut the number of tanker cars it expects to use

on North American tracks this year to 140,000 from 200,000.

The Bruderheim terminal was designed to handle 70,000 barrels per day, or about

10.5 unit trains per week. Instead it handled five unit trains on a “spot” basis through

the first quarter and has contracts to move 5.5 unit trains a week in the third quarter.

Earlier in March, Canexus booked a non-cash impairment of C$58 million in the

terminal, citing a shortfall in operating profits and higher-than-expected construction

costs of C$356 million.

The company said its efforts to find a buyer for the Bruderheim facility have run

afoul of the slump in oil prices, denying the company funds to “de-lever” its balance

sheet.

Canexus shares are now trading around C$1.60, compared with its 52-week range

of C$1.37-C$5.49.

It posted a fourth-quarter loss of C$309 million versus a profit of C$1.2 million a

year earlier.

—GARY PARK

LAND & LEASINGNorth Dakota Trust Lands cancelsscheduled online O&G lease auction

The Minerals Management Division of the North Dakota Department of Trust

Lands announced March 25 it was offering two oil and gas leases in the south-

west corner of the Sanish field under Lake Sakakawea in McKenzie County

through its online auction provider EnergyNet. Bidding on those tracts was to

begin on April 1; however, Trust Lands announced March 31 that the auction has

been cancelled.

The two tracts are adjacent and are 80 (160 gross) and 59.75 (119.5 gross) net

acres and within an existing 2,560-acre spacing unit. There are no wells crossing

either tract, which lie slightly less than a mile from both shores of the lake.

However, there are active wells on nearby shores along with a number of wells

being drilled and permitted on the nearby east shore according to Department of

Mineral Resources data.

The leases are approximately two miles south of two 80-net acre Trust Lands

tracts that were leased on an EnergyNet auction held in early March which

Continental Resources picked up for $14,500 per acre by stepping in its only bid

with just 23 seconds remaining the online bidding. Those two tracts netted Trust

Lands $2.272 million and were each part of 160-gross acre tracts that lie under

and along the east shore of Lake Sakakawea. There were no existing wells on

either tract, but Continental has one active well and six more permitted on an

adjacent onshore section.

—MIKE ELLERD

l C O M P A N Y U P D A T E

PetroShale in growthmode after strategicacquisitions in 2014


Through a series of acquisitions in

2014, Bakken non-operator

PetroShale Inc. increased its North

Dakota asset base by 2,442 net acres of

oil and gas leases with approximately 140

barrels of oil equivalent per day of pro-

duction, helping the company to increase

average daily production to 519 boepd,

up 109 percent over the third quarter and

up 197 percent over the fourth quarter of

2013.

The 2014 acquisitions nearly doubled

the company’s land holdings to 4,408 net

acres, of which 2,259 are held by produc-

tion after a year-long push to up its HBP

acreage from 31 to 51 percent.

Among those acquisitions was an

18.75 percent working interest in a pro-

posed drill block in McKenzie County

and a 19.14 percent working interest in a

spacing unit in Williams County.

PetroShale also partnered with Slawson

Exploration in the acquisition of oil and

gas leases on eight tracts in the Van Hook

Peninsula in Mountrail County in a

Bureau of Land Management lease auc-

tion. And the company is a joint venture

partner with Slawson on the Slawson-

operated Stockyard Creek project in

Williams County.

PetroShale said “challenging times

also present opportunities” so it will be

see PETROSHALE GROWTH page 12

The 2014 acquisitions nearlydoubled the company’s land

holdings to 4,408 net acres, ofwhich 2,259 are held by

production after a year-long pushto up its HBP acreage from 31 to

51 percent.

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Slawson Exploration Co. seems to

always know how to make money in

the hunt for oil. In fact, exploration in the

Williston Basin could be considered syn-

onymous with the Slawson name. The

Kansas-based private, family-owned com-

pany is an industry leader with a reputation

of great success while facing tough chal-

lenges. As rigs migrate from the fringe areas

of the Bakken to better producing core areas,

Slawson finds itself in a coveted position

with several rigs in southwest Mountrail

County.

As of March, the company had more than

100 wells on confidential status in the Big

Bend and Van Hooks fields, according to the

state’s Department of Mineral Resources

data. But Slawson’s activity covers an array

of oil fields in western North Dakota coun-

ties including McKenzie, Dunn, Divide and

Billings. In addition to exploring and devel-

oping the middle Bakken dolomite, Slawson

Exploration has explored other formations

in the Williston Basin including the upper

Bakken shale and the False Bakken. The

False Bakken is an organic-rich limestone

interval in the Lodgepole formation overly-

ing the upper Bakken shale that can appear

very similar to the upper shale, hence the

name “False” Bakken. When operators

began horizontal drilling, the False Bakken

became the point at which to start the curve

transitioning from vertical to horizontal to

drill into the middle Bakken.

But the formation was more than just a

stratigraphic marker for Slawson. The com-

pany is believed to be the first and only oper-

ator to successfully drill and complete a pro-

ducing well in the False Bakken, as it did it

in eastern Montana where the company is an

active operator. Its Weasel 1-36H False

Bakken well in the Elm Coulee field in

Richland County began producing in

August of 2012 and as of January 2015 had

produced 22,637 barrels of oil over 790

days, averaging 64 barrels of oil per day,

according to data from the Montana Board

of Oil and Gas Conservation.

A first for the BakkenSlawson Exploration marks 40 years of

drilling for oil in the Williston Basin having

drilled its first well in the region in 1975. It

also holds the distinction of being the only

early operator remaining in the Bakken

since the onset of horizontal drilling more

than 25 years ago. In 1989, Slawson spud its

first horizontal well, the Sidewinder 1-7H

and reached new heights with its initial pro-


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COMPANY UPDATESaturn probes Saskatchewan plays

Saturn Minerals, a Vancouver-based oil and natural gas junior, is pressing ahead

with exploration of its two oil properties in the northern Williston Basin area of

Saskatchewan.

In the last two months it has completed a third 2-D seismic program in the Little

Swan holding to evaluate the hydrocarbon potential of the play, less than two

months after updating seismic data and drilling an initial exploration well in its

Bannock Creek holding northwest of Little Swan.

The company’s interest in Little Swan, which consists of 254,000 acres, broad-

ened in 2011 when an exploratory drill program targeting shallow coal seams

yielded indications that oil had migrated through the system.

That show was later identified as a subsurface oil seep, pointing to an active oil

system within that part of the Williston Basin.

So far, Saturn has completed five lines of 2-D seismic covering almost 40 miles,

hoping it can identify structural and stratigraphic traps in established oil producing

formations similar to those it has already identified at Bannock Creek.

It said the Bannock Creek structure covers a minimum of 480 acres with the

potential to contain up to 38 million barrels of oil in place from the three targeted

reservoirs and compares “very favorably” with existing producing light oil pools

to the south of Bannock Creek and Little Swan.

At Bannock Creek, the company has identified 1,920 acres of oil-bearing Red

River formation and plans to continue seismic work in the area this year.

Chief Executive Officer Stan Szary said March 28 that three seismic programs

have been completed on the Bannock Creek property since 2012.

He said a “strong exploration target” has been established, proving that “con-

ventional oil exploration is viable and exciting in this part of the Williston Basin.”

The area is serviced by a web of major rail lines, paved all-weather highways

and extensive rural and logging roads, supporting eventual development of new

discoveries. Saturn said it has a strategic ownership in Inowending Exploration &

Development Corp., a First Nations-owned exploration and development company

co-founded by Saturn and a consortium of Saskatchewan aboriginal communities.

—GARY PARK

l B A K K E N E X P L O R E R S P R E V I E W

A family traditionSlawson carries a long, rich history of Bakken exploration

see EXPLORERS PREVIEW page 11

Don’t miss it!Petroleum News Bakken’s annu-

al magazine, The Bakken Explorers,will be released during the 2015Williston Basin Petroleum confer-ence in Regina, Saskatchewan inlate April. Make sure your adver-tisement salutes active E&P compa-nies in the basin by contactingPetroleum News Bakken today at907-522-9469. This article is anearly release of one of the manyfeatures that will appear in the fullcolor, slick magazine.

Grace Drilling rig No. 58 spud Slawson Exploration’s Sidewinder 1-17H horizontal upperBakken shale well in the Ash Coulee field in northern Billings County on Dec. 11, 1989.

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BAKKENStats● B A K K E N C O M M E N T A R Y

QEP puts 3 common-pad wells on IP list, 1 on top

MIKE ELLERDPetroleum News Bakken

Three common-pad QEP Energy wells

in the Grail field of eastern McKenzie

County made this week’s top 10 initial

production, IP, list. One, completed in the

middle Bakken, topped the list at 2,539

barrels, another, completed in the Three

Forks, in the No. 4 spot at 2,106 barrels,

and the third, another Three Forks well,

fills the No. 7 spot at 1,974 barrels (see

map this page and charts on pages 8 and

10).

Petro-Hunt came in with the No. 2 IP

with a Three Forks well in the Clear

Creek field in northeastern McKenzie

County that produced 2,477 barrels in the

first 24-hours of production.

One of Whiting’s middle Bakken wells

in the Arnegard field in central McKenzie

County filled the No. 3 IP spot at 2,266

barrels, and EOG Resources had the No.

5 IP of 2,054 barrels from a middle

Bakken well in the Squaw Creek field on

the Fort Berthold Indian Reservation in

eastern McKenzie County.

ConocoPhillips subsidiary Burlington

Resources has two wells on this week’s

list, both on a common pad in the Corral

Creek field northern Dunn County, one a

middle Bakken well in the No. 6 spot at

2,044 barrels and the other a Three Forks

well in the No. 8 spot at 1,643 barrels.

Rounding out this week’s top 10 list is

Oasis Petroleum in the No. 9 spot at

1,569 barrels from a Three Forks well in

the Siverston field in north-central

McKenzie County, with WPX Energy in

the No. 10 spot at 1,461 barrels from a

Three Forks well in the Squaw Creek

field.

The average of this week’s top 10 IPs

is 2,013 barrels, which is below the aver-

age of 2,220 barrels thus far in the year.

The highest weekly average was 2,808

barrels in the first week of January, and

the lowest average was 1,721 barrels dur-

ing the week of March 10-16.

North Dakota permittingPermitting activity picked up this

week with 46 drilling permits issued in

North Dakota, up from the 33 permits

issued the previous week (see charts on

pages 9 and 10). The 33 permits issued

last week are the fewest permits issued in

any week this far in 2015.

Most of this week’s permits were

issued in Mountrail (20) and McKenzie

(18). Seven permits were issued in

Williams County and one in Renville

County.

EOG received the most permits at 15

(all in Mountrail County), followed by

Oasis at 10 (five in Mountrail and five in

Burke) and Continental and XTO Energy

at seven each. All of Continental’s per-

mits are in McKenzie County and XTO’s

are split between McKenzie and Williams

counties. ●

BIG

HO

RN

EN

GIN

EER

ING

Company Exchange Symbol Closing price Previous Wed.

Abraxas Petroleum Corporation NASDAQ AXAS $3.30 $3.10

American Eagle Energy Corporation NYSE AMZG $0.19 $0.18

Arsenal Energy USA, Inc. TSE AEI $3.33 $3.27

Baytex Energy USA Ltd. NYSE BTE $16.14 $15.57

Burlington Resources Co., LP (ConocoPhillips) NYSE COP $63.02 $63.05

Condor Petroleum TSE CPI $0.15 $0.16

Continental Resources, Inc. NYSE CLR $45.66 $40.98

Crescent Point Energy US Corporation TSE CPG $29.14 $29.47

Denbury Onshore, LLC NYSE DNR $7.38 $7.64

Emerald Oil, Inc. NYSEMKT EOX $0.75 $0.89

Enerplus Resources USA Corporation NYSE ERF $10.44 $10.38

EOG Resources, Inc. NYSE EOG $91.22 $89.96

Fidelity Exploration & Production (MDU) NYSE MDU $21.38 $21.59

Halcon Resources NYSE HK $1.64 $1.69

Hess Corporation NYSE HES $69.18 $69.10

Legacy Reserves Operating LP NASDAQ LGCY $10.19 $10.50

Marathon Oil Company NYSE MRO $26.64 $26.41

Mountain Divide, LLC (Mountainview Energy) CVE MVW.V $0.02 $0.04

Newfield Production Company NYSE NFX $36.09 $33.77

Northern Oil and Gas NYSE NOG $8.01 $7.42

Oasis Petroleum North America NYSE OAS $14.69 $13.30

Oxy USA, Inc. (Occidental Petroleum) NYSE OXY $74.24 $73.72

PetroShale Inc. CVE PSH $1.14 $1.12

QEP Energy Company YSE QEP $20.88 $21.04

Samson Resources Company (KKR & Co.) NYSE KKR $23.08 $22.83

SM Energy Company NYSE SM $52.57 $49.34

Statoil Oil and Gas LP NYSE STO $17.86 $17.95

Triangle USA Petroleum Corporation NYSE TPLM $5.07 $5.18

Whiting Oil and Gas Corporation NYSE WLL $32.05 $31.57

WPX Energy Williston, LLC NYSE WPX $11.19 $11.21

XTO Energy, Inc. (ExxonMobil) NYSE XOM $84.46 $84.86

Bakken producers’ stock pricesClosing prices as of April 1 along with those from previous Wednesday

Brent and WTI prices & spreadMarch 26–April 1, 2015

3/26 3/27 3/30 3/31 4/1 ChangeBrent $59.19 $56.41 $56.29 $55.11 $57.10 $2.09WTI $51.43 $48.87 $48.68 $47.60 $50.09 $1.34

Delivery Month: May

WTI $51.43 $48.87 $48.68 $47.60 $50.09 $1.34Spread $7.76 $7.54 $7.61 $7.51 $7.01 $0.75

$8.00

$59.00

$60.00

Weekly Summary

$7.50

$53 00

$54.00

$55.00

$56.00

$57.00

$58.00

TISp

read

(US$)

rBarrel(US$)

$7.00

$48.00

$49.00

$50.00

$51.00

$52.00

$53.00

Bren

t/WT

Pricepe

r

Source: CME Group

$6.50$47.003/26 3/27 3/30 3/31 4/1

Brent WTI Spread

Top 10 ND Bakken Wells, by IP, March 24-30


IPs for ND Bakken wellsMarch 24–30, 2015

This chart contains initial production rates, or IPs, for active wells that were filed as completed with the state of North Dakota from March 24-30, 2015 in the Bakken petroleum system,which includes formations such as the Bakken and Three Forks. The completed wells that did not have an available IP rate (N/A) likely haven’t been tested or were awarded confidential(tight-hole) status by the North Dakota Industrial Commission’s Department of Minerals. This chart also contains a section with active wells that were released from confidential statusduring the same period, March 24-30. Again, some IP rates were not available (N/A). The information was assembled by Petroleum News Bakken from NDIC daily activity reports and othersources. The name of the well operator is as it appears in state records, with the loss of an occasional Inc., LLC or Corporation because of space limitations. Some of the companies, ortheir Bakken petroleum system assets, have been acquired by others. In some of those cases, the current owner’s name is in parenthesis behind the owner of record, such as ExxonMobilin parenthesis behind XTO Energy. If the chart is missing current owner’s names, please contact Ashley Lindly at [email protected].

County (Co.) abbreviations are as follows — BIL: Billings, BOT: Bottineau, BOW: Bowman, BRK: Burke, DIV: Divide, DUN: Dunn, GDV: Golden Valley, MCH: McHenry, MCK: McKenzie, MCL: McLean, MER: Mercer, MNT: Mountrail, REN: Renville, SLP: Slope, STK: Stark, WRD: Ward, WIL: Williams

—Ashley Lindly | [email protected]


North Dakota oil permit activityMarch 24–30, 2015

Abbreviations - Following are the abbreviations used in the report and what they mean:FNL = From North Line | FEL = From East LineFSL = From South Line | FWL = From West Line

see ND PERMITS page 10

*


Top 10 Bakken wells by IP rateMarch 24–30, 2015

ND weekly county permit totalsMarch 24–30, 2015

SUBSCRIBEto Petroleum News Bakken Note: This chart contains initial production rates, or IPs, from the adjacent IP chart for active wells that were

filed as completed with the state of North Dakota from March 24-30, 2015 in the Bakken petroleum system,as well as active wells that were released from tight- hole (confidential) status during the same period. Thewell operator’s name is on the upper line, followed by individual wells; the NDIC file number; well name;field; county; IP oil flow rate in barrels of oil.

ND PERMITS continued from page 9

* Note: The geologic target for these wells was not listed in its well file because they are tight (confidential) holes, but the following fields produce from the Bakken pool; Banks, Elidah, Grinnell, Hofflund, Little Knife, Mandaree,North Tioga, Parshall, Ranch Creek, and Siverston.

** Note: The geologic target for these wells was not listed in its well file because they are tight (confidential) holes, but the Lake Darling field produces from the Madison pool.

Rep. Dunwell (Mary Ann Dunwell, D-

Helena) had a bill draft in. I don’t know

if that was in response to the Silvertip

fracture in Laurel (an ExxonMobil

pipeline that failed under the

Yellowstone River near Billings in 2011)

because after the Silvertip fracture,

(then) Gov. Schweitzer had a big study

done, and when that study was complet-

ed there was a bunch of recommenda-

tions. And then after we had the break in

Glendive with the Bridger pipeline,

that’s when I started thinking: where’s

the information.

I was contacted by the True family

(which owns the pipeline company) that

weekend that the break took place.

Immediately after they told me, I

thought: okay, here’s some basic infor-

mation that I need so that I can share it

back with my district and make sure that

everybody knows what’s going on. So I

went through my list of questions and

tried to get as much basic information as

I could ― what was the size of the

pipeline, what is the distance between

the cutoff valves, how much was spilled,

what was actually in the pipeline, and all

that. And that’s when I discovered that

the only place you could really get that

information was from that company

because there was nothing online to pro-

vide it.

And I thought we’ve got to have more

of this information. Then I discovered

that Rep. Dunwell had this rough draft.

So I then sat down with the stakeholders.

I had a bunch of the pipeline companies,

I had some of the environmental groups,

and shared information back and forth to

see what we could reasonably get posted

online without compromising the safety

of the industry and still make sure we

had some kind of information available

to the general public.

And I’m going to continue to meet

with folks in the industry to see what

additional information we can post in the

future to help the citizens and the

pipelines as well because the federal

government, PHMSA — the Pipeline

and Hazardous Materials Safety

Administration — they control it through

the Department of Transportation, so

we’re sort of left out in the cold.

Infrastructure spendingPetroleum News Bakken: There are

now several bills that would provideinfrastructure funding to oil-impactedcommunities, many in your district. Whatare your views on getting infrastructurefunding out of the current session?

Rosendale: I think that we’re going to

get some type of infrastructure legisla-

tion passed and just like any session you

don’t know exactly what you’re going to

end up with. The governor proposed a

bill but Republicans just cannot support

that. When you go in with a piece of leg-

islation and you pile so many different

programs and projects and spending into

it, it sounds like Washington politics.

Senate Bill 416 is the type of legisla-

tion I started talking about six months

ago back in my home district and came

up here and started meeting with differ-

ent senators and said we have got to

have something that first of all defines

failures, deficiencies and expansions so

that we can prioritize projects. Then the

next thing we have to do is to be able to

define the communities’ ability to pay.

So we have a rating system for the

urgency of the project, we have a rating

system for the community’s ability to

contribute, and then we have the last

metric that says here’s now what the

state is going to be expected to con-

tribute to this investment as well so that

it’s fair for everybody across the entire

state.

Petroleum News Bakken: How muchmoney would be available through SB416?

Rosendale: $150 million is going to

be the initial investment.

Petroleum News Bakken: Is that gen-eral fund money?

Rosendale: It’s going to be a combi-

nation of general fund money and bond-

ing. Basically you’re going to have that

$150 million that will be in a pot, if you

will. And of that, $50 million is going to

come out for capital projects statewide.

Some of it is going to go to the universi-

ty system, there’s a crime lab ― some

capital projects that the governor and the

Legislature defined as necessary invest-

ments. Then the remaining two-thirds of

that revenue would be put out in grant

form for water, sewer, roads.

Petroleum News Bakken: But theRepublican caucus has generally beenopposed to bonding.

Rosendale: It’s not going to be an

easy sell. This is not a slam dunk.

Petroleum News Bakken: Would yousupport the bill with the bonding provi-sion?

Rosendale: I’ll support this. I made it

extremely clear before I left my district

that there was only one way that we

were going to be able to produce an

infrastructure bill that would be able to

come to fruition and that was if it was

inclusive of the state. The governor

already made it exceedingly clear that he

would not support legislation that was

geographically focused. He wasn’t going

to do it. So this is going to cover the

state.

And as I’ve looked at the declining

cost of the bonds that the state has right

now, and I serve on Finance and Claims,

and I look at the ability to access some

additional bonds, this would actually be

less than we had originated as these

bonds are declining. It would still keep

us well below that level.

Petroleum News Bakken: So SB 416essentially eliminates the need for theinfrastructure spending originally includ-ed in the Governor’s proposal in HB 5?

Rosendale: Correct.

Petroleum News Bakken: Now you’redown to just two infrastructure bills, SB416 and Rep. Knudsen’s infrastructurebill, House Bill 402. Are they competingpieces of legislation?

Rosendale: In a way they’re duplica-

tive, but only in as much as HB 402 is

going to be geographically focused. So

while I will support that bill, I have

major concerns it would be vetoed.

Petroleum News Bakken: The biggerquestion here is: are you optimistic thatsome type of infrastructure spending billwill emerge from the session?

Rosendale: I am always optimistic. If

you spend any time around me, you’ll

know that it takes about 30 minutes for

me to restore myself to a good, positive

outlook regardless of what has happened.

I was confident that we were going to be

able to pass 218 (an infrastructure bill in

the 2013 session that was vetoed) all the

way through the process. I was confident

we were going to be able to override the

veto until the day that it was absolutely

condemned. I’m always optimistic that

things will happen. l


COMPANY UPDATETroubles grow at Canada’s Legacy

Trouble is swirling around and within Calgary-based Legacy Oil + Gas, whose

principal properties include the Bakken oil resource play in southeastern

Saskatchewan and which is viewed by some analysts as a leading candidate for a

possible takeover bid.

On top of its financial struggles in a testing environment, Legacy now finds

itself in the spotlight over a decision to backstop a loan for Chief Executive

Officer Trent Yanko and his wife.

In addition to that disclosure, Legacy also reported March 25 that Chief

Financial Officer Matt Janisch had “stepped down,” without offering any further

explanation.

Company financial documents show that the Yankos bought C$5.684 million

of Legacy shares last July in a margin account with the Bank of Nova Scotia.

They exercised about 12.75 million warrants, converting them into shares at a

price of C$3.24 each on July 17 when Legacy closed trading at C$8.53 on the

Toronto Stock Exchange.

Legacy said the Yankos’ debt was “supported by the lending value” of the 3.55

million shares they held.

By Dec. 1, Legacy shares closed at C$2.63, below the value of the bank’s mar-

gin requirements, triggering a margin call.

Legacy said Scotiabank “gave notice to the Yankos that it intended to reduce

the original indebtedness by arranging for the sale of the common shares held by

the Yankos.”

But the bank agreed to “refrain from such sales if it received a guarantee from

the corporation.”

Legacy said its board of directors decided it would be in the best interests of

the company “to provide the guarantee to the bank as it would prevent involuntary

sale of common shares by the president and chief executive officer at an inoppor-

tune time for Legacy and its shareholders and would remove external pressure on

Mr. Yanko that might affect corporate decisions.”

On Dec. 29, Legacy agreed to cover a debt repayment guarantee for up to

C$5.6 million.

The company can ask the bank to end Legacy’s obligations if Legacy shares

trade at C$5 or more for 10 consecutive trading days. Currently, Legacy is trading

below C$2, reinforcing its record as one of the poorest energy performers on the

Toronto exchange.

On March 25, the company reduced its 2015 capital budget to C$182 million

from the C$238 million announced in December.

—GARY PARK

duction rate. Never had a Bakken well

exceeded 1,000 barrels of initial production,

but in February 1990 when the Sidewinder

went on production, the well produced

1,362 barrels in the first 24 hours. North

Dakota’s oil production at the time was a

mere drop in the bucket to the nearly 1.2

million barrels per day the state is averaging

today, but in November 1989 — a month

before the Sidewinder was spud — the state

produced just over 7,500 barrels per day. So

an IP of 1,362 barrels was big news.

Only a few years prior, Slawson was

struggling to survive, having sold almost the

entire company to Vintage Petroleum during

the price collapse of the mid-1980s.

Slawson was founded in 1957 by geologist

Donald C. Slawson in Wichita, Kansas. His

sons Todd, Craig and Steve eventually led

the company. So in the 1980s, brothers Todd

and Craig set out to explore the Williston

Basin, and eventually the Sidewinder and

other wells began successfully hitting

numerous fractures in the upper Bakken

shale.

“We were not drilling the middle Bakken

(dolomite) but rather the Bakken shale

itself,” Todd Slawson told Petroleum News

Bakken in the fall of 2014. “Meridian (Oil

and Gas) and Slawson were drilling for frac-

tures in an area known for brittleness, thus

the high initial production rates were the

result of hitting them.”

With Slawson’s reputation, finding part-

ners comes easy. Australia-based Samson

Oil & Gas Ltd. formed a joint venture with

Slawson in 2013 to advance its plan for full-

field development in the North Stockyard

project in Williams County. But no operator

is immune to sliding commodity markets, so

Slawson has laid down its drilling rig in the

area due to the weak oil prices. The infill

development plan for North Stockyard

includes eight middle Bakken wells and

nine of 22 Three Forks wells that have been

drilled. Eight of the nine Three Forks wells

are targeting the first bench and the remain-

ing well targets the second bench. Given the

slowdown in development, 13 wells will

remained undrilled until prices rebound.

Calgary-based PetroShale has also

formed a non-operating partnership with

Slawson and the company said it allows

PetroShale to identify new opportunities to

quickly grow in the Bakken.

“Slawson is known as an innovator and

fast follower with extremely efficient opera-

tions,” PetroShale says on its website.

That “innovator”-type thinking attracted

North Dakota LNG, a subsidiary of Watford

City-based Prairie Cos., which said in May

2014 that it would open a liquefied natural

gas production facility near Tioga. It named

Slawson as the first to utilize the service to

fuel its six operated rigs in the Williston

Basin.

Carrying on the businessThe Slawson family has a rich history in

the Bakken, one that perhaps the patriarch

fully expected when he left Rocky Mountain

operations to his sons some 25 years ago.

“He basically gave us free rein to do what

we wanted as long as we could find part-

ners,” Craig Slawson said. While Craig left

the company to form his own exploration

and production company in 2014, his broth-

ers remain with the family company where

Todd serves as president and Steve oversees

operations in Kansas, Oklahoma and Texas.

Their father passed away in 2014 at the age

of 80. l


EXPLORERS PREVIEW


ROSENDALE Q&A


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seeking acquisitions within the Bakken to

grow and expand its asset base in the cur-

rent price environment.

“With the completion of wells in

progress at year end, coupled with the

acquisition of a producing property late in

the fourth quarter and drilling activity cur-

rently under way, we are positioned for

substantial production growth in 2015,”

Bruce Chernoff, executive chairman and

CEO, said in a March 30 statement.

Reserves rise 10-foldWith the acquisitions come a significant

increase in PetroShale’s proved plus proba-

ble or 2P reserves from 701 million barrels

of oil equivalent at the end of 2013 to 10.3

billion boe (8.25 billion net) at the end of

2014, an increase of more than 10-fold.

Nearly all of those reserves are in the

Williston Basin in Montana and North

Dakota although the company has some

assets in Canada.

Of those 10.3 billion boe 2P reserves, 86

percent or some 8.9 billion barrels, are light

and medium oil with the remaining 14 per-

cent consisting nearly entirely of natural

gas. Of the 2P oil reserves, 5.7 billion or 64

percent are proved or 1P oil reserves. And

of those 1P oil reserves, 1.7 billion barrels

are developed producing, which represents

30 percent of the company’s 1P oil

reserves, 19 percent of its 2P oil reserves,

and 17 percent of its total gross 2P reserves.

“Throughout 2014, our focus on the

execution of our strategy resulted in signif-

icant growth in our production, reserves

and land base, and positioned PetroShale

for future growth,” Chernoff said. “We suc-

cessfully closed several transactions within

our North Dakota focus area, including

leases with drilling activities undertaken

during the year, and producing properties in

prolific counties such as McKenzie,

Williams and Mountrail.”

For the year, PetroShale participated in

43 gross (3.3 net) wells and its production

averaged 309 boepd. It averaged 519 boepd

during the fourth quarter which marked a

197 percent improvement year-over-year.

Solid netbacksAmid the weak and volatile global crude

oil market, PetroShale still realized net-

backs of $48.13 per boe in 2014. And it

expects to see reductions in drilling costs in

2015 as operators lower capital spending

and drilling programs.

“The severely weakened commodity

price environment, which began in the

fourth quarter of 2014, continues to nega-

tively impact oil and gas producers.

However, despite WTI prices averaging

less than US$50 per bbl in the beginning of

2015, PetroShale’s operating netback

remains in excess of $20 per boe,”

Chernoff said. “This demonstrates the qual-

ity of our land base and the impact of being

partnered with the basin’s leading cost-

effective and efficient operators who are

able to successfully manage through a vari-

ety of price cycles.”

PetroShale borrowed through a subordi-

nated loan facility and a new senior credit

facility which it said offers flexibility with

drilling activity decisions until commodity

prices recover.

“Despite an expected lower drilling pro-

gram relative to 2014, we anticipate higher

operating cash flows in 2015 as a result of

the activities undertaken in late 2014 and

early 2015,” Chernoff said, “which will

result in new production coming online

throughout 2015.” l


PETROSHALE GROWTH

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LISTINGS SECTION

Contact Bonnie Yonker, Phone 425-483-9705 | Raylene Combs, Phone 509-290-5903 | Renee Garbutt, Phone 907-522-9469 | Susan Crane, Phone 907-770-5592

Need to stretchyour dollar?Advertise 12x in Petroleum News Bakken,

competitive rates with lots of complimentary extras, including:


Minister Lisa Raitt to ask a committee of

Canada’s Parliament to examine CN’s

operations as Petroleum News Bakken

reported March 22.

Where the buck stopsThe growing public concern over

crude-related accidents has landed square-

ly on Mongeau.

Although he was paid C$9.3 million in

2014, up 14 percent from 2013, CN’s

directors have taken the unusual step of

trimming a portion of his eligible bonus

because of the rise in derailments and

employee injuries, without saying exactly

how much he lost.

His total compensation last year

included a salary of C$1.2 million, a

bonus of C$2.5 million and stock awards

valued at C$3.3 million.

In addition, Mongeau holds stock

options of C$65.6 million and shares

worth C$49.7 million.

For 2015, “safety and sustainability”

will be one of five factors that will meas-

ure Mongeau’s performance and deter-

mine his next bonus, a company

spokesman said.

An analysis conducted by Reuters sug-

gests CN could face more intense regula-

tory pressure, possibly resulting in higher

costs for shipping crude by rail in Canada.

Track failureReacting to the Ontario accidents,

Canada’s Transportation Safety Board

pinned much of the blame on track failure,

suggesting crude unit trains could make

tracks more susceptible to defects.

CN will refrain from commenting on

those accidents until investigations are

completed, although the railway doubted

that crude unit trains were responsible,

noting that other heavier loads have run

safely for decades.

But it has hired independent experts to

review the issues.

CN told the news agency it is “keenly

aware of its recent safety trends, starting

with a sudden increase in its accident rate

in 2014,” forcing it to start testing tracks

more frequently, increasing spending on

infrastructure and introducing new tech-

nology to detect weaknesses in tracks and

equipment.

That capital outlay will grow by C$300

million this year to C$2.6 billion.

Too long, too heavy, too fastCN said it is “important to view CN’s

safety performance over a span of time to

assess meaningful trend lines, not just on

the basis of a single- or two-year perspec-

tive.”

Its own statistics, used by Reuters,

showed its Canadian accident rate

dropped 26 percent from 2007 to 2013 to

1.71 accidents per million train miles,

then climbed to 2.67 last year, its highest

level in at least a decade.

Doug Finnson, president of the

Teamsters union representing CN’s train

crews, said the union is on record as say-

ing “the trains are too long, the cars are

too heavy and the trains go too fast.”

In contrast, rival Canadian Pacific

Railway posted a better safety record last

year in moving crude.

CN hauled 128,000 tanker loads, or 2

percent of its freight volume, while CP

moved 110,000 tankers, 4 percent of its

total. l


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North Dakota Petroleum CouncilNorth Slope Telecom (NSTI)Northern Oilfield Services Inc.Northwest Linings & GeotextileOasis PetroleumOilfield Improvements ........................................12Percheron, LLCPetroleum News Bakken...............................13, 15PetroShalePolyguard ProductsQEP ResourcesQuality MatR360 Environmental SolutionsRamadaTenCateTrinity Health Occupational MedicineUnit Drilling CompanyVactor ManufacturingWanzek Construction ............................................2

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TU’s MEB is ranked in the top 40 online graduate business programs by U.S. News & World Report.

the university of

Collins College of BusinessOnline delivery www.utulsa.edu/meb

temporarily, to a biweekly schedule ―

we publish each Sunday (online sub-

scribers receive issues on Fridays) and on

the new schedule we will publish the first

and third Sundays each month. However,

in rare months with five Sundays, we will

also publish on the fifth Sunday, putting

out three editions in those months.

When the market turns around and

activity ramps up and we see our ad rev-

enues rise, we fully intend to return to a

weekly publication schedule.

Weekly news summariesWhile full editions are moving to a

biweekly schedule, we will continue to

provide news to our readers through

abbreviated news summaries in the

weeks when we don’t publish a print edi-

tion.

In 2014 we began offering, under a

separate subscription, daily news bul-

letins via email with news briefs as sto-

ries broke, and we will continue to offer

that service. However, in order to keep all

of our readers abreast of important issues

on a weekly basis, we will provide to all

electronic subscribers via email a weekly

news summary every Friday that a print

edition is not published. We will then

provide in depth coverage of the more

important of those news briefs in the fol-

lowing week’s full edition.

We look forward to returning to a

weekly publication schedule as soon as

the business situation allows us to do so.

—MIKE ELLERD, EDITOR-IN-CHIEF


NEW SCHEDULE


SAFETY RECORDWhile full editions are moving toa biweekly schedule, we will

continue to provide weekly newsto our readers through

abbreviated news summaries.

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In addition, the bill immediately takes

DOT-111 and unjacketed CPC-1232 tank

cars off the rails since they are shown to

pose a higher risk of puncturing and

catching fire during derailments, accord-

ing to the senators.

Other aspects of the bill include: new

and increased fines on railroads and ener-

gy companies that violate hazardous

materials and safety laws; funding for

first-responder training and increased rail

inspections and energy product testing;

and comprehensive oil-spill response

plans.

“Every new derailment increases the

urgency with which we need to act,” said

Cantwell, who also serves on the Energy

and Natural Resources Committee. “This

legislation will help reduce the risk of

explosion in accidents, take unsafe tank

cars off the tracks, and ensure first

responders have the equipment they

need.”

Understanding Bakken crudeOn April 1, the North Dakota

Industrial Commission’s order to require

all Bakken crude to be conditioned to

pressures no higher than 13.7 pounds per

square inch took effect. However, a recent

Sandia National Laboratories report for

the U.S. Department of Energy found that

additional sampling and analysis is neces-

sary to understand tight crude oil proper-

ties.

“The report confirms that while crude

composition matters, no single chemical

or physical variable — be it flash point,

boiling point, ignition temperature, vapor

pressure, or the circumstances of an acci-

dent — has been proven to act as the sole

variable to define the probability or sever-

ity of a combustion event,” Deputy

Assistant Energy Secretary for Oil and

Natural Gas Paula Gant wrote in a March

24 blog post on Energy.gov. “All vari-

ables matter.”

While there is statistical evidence sug-

gesting Bakken crude has a higher vapor

pressure than other crude, Gant said the

report found that available analyses are

not sufficient since Bakken samples were

measured in a wide range of ways so

research is needed to determine the best

way to collect and compare the samples.

Meanwhile, the oil industry touts its

strong safety record and urged officials to

not over-regulate with new legislation.

“Safety is our core value and zero inci-

dents is our goal,” said American

Petroleum Institute Director of

Midstream Robin Rorick in a March 24

statement. “The oil and natural gas indus-

try has led in improving safety through

tank car design and supports further

enhancements based on good science, but

prevention remains a critical piece of this

equation,” Rorick said. “We will continue

to work with the railroad industry and will

not stop until the goal of zero incidents is

achieved.”

S. 859 was referred to the Senate

Commerce, Science, and Transportation

Committee. l


RAIL REGS

company’s portfolio. In the meantime, he

said, “high return projects are limited and

not worth risking capital.” Production in

2014 totaled 530 million cubic feet of gas

equivalent per day, of which about 30

percent was liquids. The company has

historically been a gas-weighted produc-

er. For 2015, production guidance is set at

435 mmcfe to 460 mmcfe per day with

capital expenditures of $156 million. It

anticipated starting production on about

30 wells in early 2015, primarily as a

result of 2014 spud activity, with no addi-

tional first sales expected after early

April.

Samson Resources is implementing

cost control measures within its opera-

tions as well as laying off 30 percent of its

workforce. Limbacher said the decision

was not made lightly, but it was a neces-

sary step to position the company for the

long term. Samson announced it would

drop 196 employees from its Tulsa head-

quarters and 270 companywide.

“We’re focused instead on retaining

technical and professional employees that

will help execute on our future turn-

around strategy,” he said.

Bakken operationsIn the Bakken, Samson Resources is

investing in technical improvements such

as shifting from sliding sleeves to plug and

perf completions on its wells in Divide

County. It is also evaluating a reduction of

its laterals within drilling spacing units in

an effort to avoid leaving reserves behind.

Since it “cracked the code” in the Williston

Basin with changes in completion meth-

ods, the company has realized about a 50

percent increase in 30-day production

rates and estimated ultimate recovery.

In the latest data available from the

North Dakota Department of Mineral

Resources, Samson Resources ranked 25th

among the top 50 Bakken oil producers in

the state in January for operated, non-con-

fidential wells with an average daily out-

put of 5,536 barrels. In March, Samson

Resources applied to the state’s Industrial

Commission for permission to drill on two

1,280-acre spacing units in the Blooming

Prairie field in Divide County. According

to DMR data, Samson currently has 115

active wells and another 14 on confidential

status, the vast majority of which are in the

Ambrose and Blooming Prairie fields in

north-central Divide County.

The company holds approximately

127,000 net acres in the Williston Basin in

North Dakota and Montana, with activity

limited to its Ambrose assets in Divide

County where it holds 71,000 acres.

Samson Resources entered the Williston

Basin in the late 1970s and was acquired in

a $7.2 billion deal in 2011 by a team of

investors led by KKR & Co.

Samson Resources’ other Rocky

Mountain region operations include the

Powder River and Greater Green River

basins in Wyoming and the San Juan Basin

of Colorado and New Mexico.

—MAXINE HERR

19

Increased spacing

Changed completion design to plug & perf

EUR & IP30 improved by ~50%

Good results with new approach throughout our acreage

Samson Williston Wells to Date

Plug & Perf Wells Avg Plug & Perf Sliding Sleeve Wells Avg Sliding Sleeve

Cumulative Fluid vs Producing Days Williston Highlights

Open Hole Packer Sliding Sleeves

Cemented Liners, Plug and Perforations

OPERATED ACREAGE

NON-OP ACREAGE

Beetle 3H, Strom 8H, Ranchero 2H, Coronet 8H

Avg EUR 383 Mboe

Ranchero 6H, Ranchero 8H Currently completing

Ness 4H, Ness 6H, Odyssey 6H

First oil end of Feb.

Stingray 6H, Charger 8H

Avg EUR 427 Mboe

Dorado 6H, Dorado 8H First oil mid Mar.

Marauder 1H, Marauder 3H Avg EUR 438 Mboe

Ambrose Field - Development

Count of Wells on Production (2014 program)0-60 days 60-120 days 120-180 days 180+ days

Plug & Perf 11 4 4 0

SlidingSleeve 4 4 4 4

46%

Normalized Time (Days)

Cumulat

ive To

tal F

luid

(Mbb

ls)


SAMSON RESOURCES

SAM

SON

RES

OU

RC

ES


ly four years and the North Dakota

Industrial Commission is frustrated that

BLM didn’t take into consideration the

state rules already in place.

The Industrial Commission met March

31 to approve the state attorney general

office’s recommendation to intervene in a

lawsuit filed by the state of Wyoming on

March 26 against the new fracturing rules

which are to be enforced by BLM. When

Wyoming Gov. Matt Mead directed his

attorney general to file a petition for

review of final agency action, he called

the rules “troubling both legally and from

a policy standpoint”

(see sidebar, page

1). North Dakota

Attorney General

Wayne Stenehjem

agreed with Mead

saying the new rules

exceed BLM’s

statutory jurisdic-

tion and “purports to

regulate precisely

that activity that Congress prohibited

from federal regulation.” Stenehjem

explained that in 2005, Congress enacted

the Energy Policy Act which prohibits

regulation of hydraulic fracturing under

its underground injection control program

— part of the Safe Drinking Water Act —

and instead gives exclusive authority to

states and the U.S. Environmental

Protection Agency. Stenehjem added that

the federal Mineral Leasing Act put the

secretary of the Interior in charge of reg-

ulating surface disturbance activity and

the prevention of waste of federally

owned oil and gas resources, but

“nowhere in the MLA did Congress con-

template the regulation of underground

injection.”

“This (BLM rule) seeks to usurp and

override state’s authority,” Stenehjem

added.

Stenehjem serves on the commission

with Gov. Jack Dalrymple and

Agriculture Commissioner Doug

Goehring. Goehring was unable to attend

the meeting due to business travel, but

Dalrymple agreed that the “sensible thing

to do” is to join Wyoming in the suit since

the two states have a similar perspective

on the situation.

“This is the way that we protect our

rights,” Dalrymple said.

Adding to permit delaysThe biggest concern with the new rule

is the extended timeframe for obtaining a

permit from BLM as it would add at least

another six months to the already 290-day

average it takes to receive a federal per-

mit, according to the state’s Department

of Mineral Resources Director Lynn

Helms. Since BLM will require a map of

wellbore paths prior to issuing a permit,

operators will need to wait until that infor-

mation comes off six-month confidential

status. Furthermore, BLM has admitted to

state leaders that it does not have the staff

to process permits in a timely manner.

“It’s frustrating that we have to deal

with this in a legal context when clearly

they (BLM) are not in a position to

enforce and administrate every rule in

every state in the United States,”

Dalrymple added.

BLM has a very minimal staff in

Dickinson with an “enormous amount of

turnover,” Helms said. BLM’s Miles City,

Montana, office has assisted with the per-

mitting backlogs and delays that were pre-

viously taking up to nine months.

“The major issue is the slowdown in

terms of development,” Helms told

reporters following the March 31 com-

mission meeting, “And 2,832 of our spac-

ing units have a measurable amount of

federal minerals under them so at least

that many spacing units will see months to

years of delay in terms of permitting.”

Since North Dakota’s mineral owner-

ship resembles a checkerboard with feder-

al, state and private ownership tracts

neighboring each other throughout the

Bakken, a well pad could have several

wells on it that cannot be drilled without a

BLM fracturing permit.

“The BLM has gone way beyond what

it was given jurisdiction over, and in fact

has created a rule to make it impossible

for the BLM to accomplish its mission

which is to protect our federal minerals

from drainage and protect the correlative

rights of the citizens of the U.S. in terms

of their federal mineral wealth that

exists,” Helms said. “They’re off the

tracks.”

Dalrymple was “puzzled” that BLM

didn’t attempt to work more with the state

as it drafted the new rules.

“Throughout our entire state history

we’ve shown — perhaps more than any

other state in the country — our ability to

enforce clean water and clean air laws in

this country and we have a good reputa-

tion. So why would they come down with

this heavy-handed uniform set of rules

without any attempt to reach out to the

states?” Dalrymple said. “I find it very,

very confusing.”

Stenehjem said North Dakota needed

to take swift action by intervening with

Wyoming’s lawsuit so that it could also

join that state’s upcoming filing of a tem-

porary injunction to stop the rules from

taking effect June 1. North Dakota’s

Legislature has set aside $1 million for

legal fees, but Stenehjem said it should be

“a thrifty operation” because most of the

work will be handled by his office staff

and Wyoming and potentially other states

who join would help cover costs.

Tribal inclusionWhile federal mineral ownership is

scattered throughout the state, the most

significant impact of the new rules will be

on the Fort Berthold Indian Reservation

and the Dakota Prairie Grasslands where

every well will need a federal fracturing

permit. These areas currently make up

nearly a third of all Bakken production.

Stenehjem said it is in tribal government’s

best interest to take legal action either on

its own or with the state.

“To the extent that it affects them, it is

a wise investment for them to be partici-

pating to protect their own interests and

protect the revenue stream they’re realiz-

ing from oil activity on the reservation,”

Stenehjem said.

BLM has reached out to North Dakota,

Stenehjem said, hoping to reach a memo-

randum of understanding to ease some of

the state’s concerns. The tribe has

expressed interest in that, but he doesn’t

see how an MOU is legally possible.

“I’m willing to listen but I’m not opti-

mistic about it,” he said. “Anything short

of recognizing our primacy is not likely to

be acceptable.”

Stenehjem said he expects other oil

producing states such as Oklahoma,

Colorado and Montana to start litigation

against BLM as well. l


MINNESOTA • NORTH DAKOTA • WISCONSIN

Ph: 888-414-2048 • www.go2e3.com

SERVING THE BAKKEN SINCE 2009

Permitting State Siting (ND Public Service Commission) NEPA (USFS, BLM, USACE) Emergency Response Planning

ENVIRONMENTAL SERVICES


FRACK FIGHTprogram to regulate underground injections

outside of the Safe Drinking Water Act.

Wyoming, which was first in the nation to

adopt its own fracturing rules, also insists

the policy interferes with its state regula-

tions and exceeds the U.S. Department of

the Interior’s statutory regulations.

Wyoming Gov. Matt Mead directed the

state’s attorney general office to submit the

petition for review of final agency action in

U.S. District Court on March 26.

“I hope that whatever happens in the

case, there is recognition that states like

Wyoming should be rewarded for their

leadership, not punished by having addi-

tional layers of regulation,” Mead said.

But BLM insists the new rules would

not preempt state regulations if they prove

to be more stringent than the federal rules,

but instead, “provide a baseline where reg-

ulations don’t exist yet,” BLM Director

Neil Kornze told the U.S. House Natural

Resources Committee’s Energy and

Mineral Resource Subcommittee. Kornze

said he expects wellbore integrity and other

operating standards will remain the state’s

jurisdiction under memorandums of under-

standing negotiated by BLM.

“Because BLM manages land scattered

across the country, it’s important for (it) to

work with states and make sure the systems

work efficiently,” Kornze said.

When the new BLM rule was

announced, it was immediately met with a

lawsuit from the Independent Petroleum

Association of America and Western

Energy Alliance to stop the new regulations

from taking effect June 1. They contend the

new regulations have little scientific or

engineering basis, calling the rules “another

regulatory overreach by the Obama

Administration that will hurt America’s oil

and natural gas producers.”

Coming to the same conclusion, U.S.

Sen. Jim Inhofe of Oklahoma called the

rule “unnecessary” and “duplicative” and

joined 26 other Republican senators on

March 26 in a bill that would effectively

block the new rule and leave fracturing reg-

ulation up to the states.

“The past 60 years have proven that

states are in the best position to understand

their unique geologies and to determine

what their energy needs are and what regu-

lations are necessary to support and protect

their communities,” Inhofe said in a state-

ment. “There is no logical reason to add a

new layer of top-down bureaucratic regula-

tion that duplicates what is already being

done effectively by the states.”

Some want more regsMeanwhile, some Democratic congress-

men introduced a group of bills dubbed the

“Frack Pack” that would impose more

stringent federal environmental regulations

on the oil and gas industry. The bills address

perceived problems associated with

hydraulic fracturing such as water and air

pollution. One of the bills would put frac-

turing under the regulation of the Safe

Drinking Water Act and require public dis-

closure of chemicals used in the fracturing

process.

“I support fracking so long as it’s done

responsibly,” Colorado Rep. Diana

DeGette said on a conference call with

environmental groups. “Unfortunately, the

current regulatory framework does not

make sure this is the case. Our laws are rid-

dled with loopholes that exempt fracking

from protections that are vital to the safety

of people and communities.”

—MAXINE HERR


BLM RULE

WAYNE STENEHJEM

“It’s frustrating that we have todeal with this in a legal contextwhen clearly they (BLM) are not

in a position to enforce andadministrate every rule in every

state in the United States.” —Gov. Jack Dalrymple

http://www.go2e3.com

Documents

l GOVERNMENT Feeling the crunch Frack fightl MOVING HYDROCARBONSl MOVING HYDROCARBONSVol. 3, No. 51 † Publication of record for the Bakken oil and gas industry Week of April 5, 2015