The Bakken Magazine - October 2015

OCTOBER 2015

www.THEBAKKEN.comPrinted in USA

PlusAchieving Field-Level

EfficienciesPage 14

AND New Oil Tracking Data

Page 8

E&P Analysts Explain Client Mood On Shale’s DilemmaPage 20

The Road To Wall Street

THEBAKKEN.COM 3

CONTENTS OCTOBER 2015 VOLUME 3 ISSUE 10

6 Editor’s NoteLearning To Talk The Bakken TalkBY LUKE GEIVER

8 ND Petroleum CouncilProgress Through Pipelines BY TESSA SANDSTROM

5 Events Calendar

Pg 20 EXPLORATION & PRODUCTION

Bakken Wall Street CoverageFrom Denver to Houston to New York, these E&P analysts share what they see now from operators and what future activity ramp ups will look like. BY LUKE GEIVER

ON THE COVER: A truck approaches a Halcon Resources Bakken well site. PHOTO: HALCON RESOURCES

Pg 14 PRODUCTS & TECHNOLOGY

The Bakken’sNew Direction

Efficiency gains and new strategy implementations are reshaping the oilfield, as we found out after a day in the field

touring remote power and gas capture sites. BY PATRICK C. MILLER

ADVERTISER INDEX22 AE2S

28 Bakken Oil Conference & Expo

18 Corval Group

11 Design Solutions & Integration

12 Dunlop Protective Footwear

5 Hotsy Water Blast Manufacturing

27 iLevel Digital

19 Lunnen Real Estate

13 Port of Vancouver USA

24 Presto Geosystems

23 SBG Energy Services LLC

26 The Bakken Magazine Webinar Series

25 Torrid Technologies Group

2 Tyco Fire Protection Products

The BAKKEN MAGAZINE OCTOBER 20154

Luke GeiverEditorThe Bakken [email protected]

EDITOR'S NOTEwww.THEBAKKEN.com

VOLUME 3 ISSUE 10

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

COPYRIGHT © 2015by BBI International

Please recycle this magazine and remove inserts or samples before recycling

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

twitter.com/thebakkenmag facebook.com/TheBakkenMag

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]

Learning To Talk The Bakken TalkEquity analysts covering the oil and gas sector can talk the talk. When we spoke to analysts from Denver and Houston for the feature, “Bakken Wall Street Coverage,” our conversations were littered with up-to-date industry jargon utilized by private investors, energy firm CEOs and the analysts themselves to describe a complex situation in a few words. We heard terms like dead-cat bounce, DUC or the new favorite, lower-for-longer. Although the language of analysts may be infused with unique terms and sentence structures, the level of detail present in their collective messaging shows their

connection to the oil and gas world. Speculation and predictive commentary provided by any analyst is only as good as the clarity within their hypothetical crystal ball is, but after reading this month’s piece you should get a sense of investor sentiment, the trending theme used to describe the state of the industry and the potential activity level expected when an oil price rally does occur.

In the interim, don’t let low oil prices lead you to believe that activity levels are stalled. All of the talk pointing to the need for efficiency in the oilfield is truly taking place and keeping the production levels in the play consistently near 1.1 million barrels per day. Staff writer Patrick C. Miller saw the field’s activity level first hand during his drive through the Bakken in the truck of Guillermo Barreto, business development manager for global power supplier Aggreko. Barreto and Miller toured the Bakken to see Aggreko’s unique approach to remote power supply and now, flare capture and utilization techniques. We’ve covered the work of Aggreko previously, but never to this level of detail. The story on their efforts in the Bakken helps to reveal just how far service companies have come from the early days of the Bakken’s activity and more importantly, how far they are still willing to go through investment and workforce commitment. (Barreto packs extra clothes in his truck to ensure he can stay on the road safer and longer).

As you continue to navigate the low oil price environment, rest assured our team is as committed as ever to covering the Bakken and telling the story of this truly unique period on the timeline of the oil, gas and energy world. By now, we hope you can see our level of com-mitment, investment and time devoted to bringing you the magazine. If this is only your first or second time reading this publication, check us out in the coming months, I think you’ll like what you see. We may not have an extra set of clothes in our vehicles at all times like Barreto, but when it’s time to cover a relevant story on the progression of the Bakken, rest assured our brand will be there.

www.THEBAKKEN.com

VOLUME 3 ISSUE 10

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]

EVENTS CALENDAR

The Bakken magazine will be distributed at the following events:

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


NORTH DAKOTA PETROLEUM COUNCIL THE MESSAGE

Progress through pipelines

By Tessa Sandstrom

They are the arteries of our country, delivering water, energy and fuel to cities, towns and remote areas all across our nation. They are pipelines, and like the veins that course through our bodies, they are vital in delivering the resources needed for our very way of life.

Every day in the United States, more than 190,000 miles of liquid petroleum pipelines and 2.4 million miles of natu-ral gas pipelines deliver energy to support our nation’s econ-omy. A vast majority—99.999 percent, to be exact, arrives at its destination safely, making pipelines the most effective, ef-ficient and economical way to transport the liquid petroleum and natural gas that millions of Americans rely on.

Although North Dakota has been an oil-producing state for more than 60 years, only recently has the state risen to become the second-largest oil-producing state in the nation. The changing technologies of oil and natural gas development have allowed for faster and more efficient means of recov-

ering oil resources, which has brought many benefits to the state, including a faster grow-ing economy, more jobs and the displacement of imported foreign oil, meaning greater energy security for our nation and cheaper fuel for each of us. Yet, this rapid growth has also made it difficult for pipeline infrastructure to keep up with the current demand. Trucks and railroads have been relied upon to haul oil to its destinations, while some natural gas has been flared due to lack of pipeline in-frastructure.

Yet, our state is making progress. Already we’ve seen the amount of crude hauled by rail drop from a high of 75 percent to less than 50 percent. More than 1,250 miles of gath-ering lines and 75,000 barrels per day of takeaway capacity are capturing and transporting more natural gas, leading to far less flaring each year. Another $1.6 billion in natural gas infra-structure planned through 2017 will help reduce that amount even more.

In terms of cross-country

movement of our resources, four pipeline projects are pend-ing, and, if approved, would transport an additional 1 mil-lion barrels of oil per day from North Dakota via pipeline. This is the equivalent of eliminating 1,505 rail tank cars every day, significantly reducing traffic on railroad tracks.

These and other projects are needed. Despite the fact

that pipelines remain the key to solving many of our state’s chal-lenges, there are those who are standing in the way of progress. These critics often use spills as a reason for halting infrastructure development, but too often, the full story is not being told. Pipe-line releases are an unfortunate reality, but they are by no means permanent.

In partnership with the

MAJOR ADDITIONS: Workers inspect the Garden Creek pipeline. As pipeline infrastructure continues to be built in the Bakken, rail transport is decreasing along with flared gas. PHOTO: NORTH DAKOTA PETROLEUM COUNCIL

THEBAKKEN.COM 7

NORTH DAKOTA PETROLEUM COUNCIL

Energy and Environmental Re-search Center and North Da-kota State University, industry is exploring new and better ways of cleaning up spills. By using the latest techniques and sci-ence, industry is able to return land to its original condition in as little as one year even in cases where saltwater is concerned.

To remedy old spills that occurred prior to 1983, the state legislature appropriated $1.5 million, with $500,000 of these funds directed toward

a pilot program to study and establish best practices for re-sponsibly removing salt from soil. An additional $1.5 million has been directed to EERC to study and analyze pipeline stan-dards to ensure North Dakota’s pipelines are built with the best technology and materials avail-able today.

Another challenge is se-curing right of ways and ease-ments. Landowners are rightly experiencing fatigue as they are often asked multiple times for

access to their land to install electric lines and crude, water or natural gas pipelines. Rec-lamation challenges have also caused some strife with land-owners, but again, industry has been working to help resolve these issues.

A Right of Way Task Force made up of landowner associa-tions, local leaders and industry representatives worked together to create a number of resourc-es, including best practices and a hotline for reporting issues

related to pipeline reclamation. In the last legislative session an ombudsman program operated by the North Dakota Depart-ment of Agriculture was cre-ated. This program, which has so far been successful, works with both the operator and landowner to ensure issues are resolved to the satisfaction of both parties.

A comprehensive pipeline network is vital to our econo-mies, businesses, homes and very way of life. These veins traverse our nation, state, coun-ties and cities, eventually com-ing into our homes to deliver water at the twist of a knob for cooking and cleaning and natu-ral gas at the flick of a switch. They deliver comfort and con-venience to us every day, and in North Dakota, they are the key to solving many of the chal-lenges associated with oil and gas development. Pipelines are not perfect, but industry stands ready to remedy any imperfec-tions to ensure the energy and resources we each depend upon are available with the flick of a switch.

Author: Tessa SandstromCommunications Manager,North Dakota Petroleum [email protected]


BAKKEN NEWS BAKKEN NEWS & TRENDS

Oil tracking trendsThe fall in oil prices is

squeezing upstream oil and gas investment, but it could be boosting overall oil demand, data from the International Energy Agency shows. Market adjustments are looming, the IEA said during an October presentation in Istanbul. Ac-cording to the globally recog-nized energy analysis group, tightening global oil supply guided by low oil prices could reduce 2016 production vol-umes by roughly 500,000 bar-

rels per day. The IEA’s belief is that as oil prices continue trading in the $50/b range, production in North America and a handful of other global production zones will not continue to supply at current levels. Volatile oil prices have already impacted produc-tion in the U.S., North Sea and Russia. Next year, IEA believes production in the U.S. will drop by 400,000 bpd.

“While oil’s recent volatil-ity has been unnerving—Brent

crude jolted from a six-year low below $43/b to above $50/b in the space of days—the lower price environment is forcing the market to behave as it should by shutting in output and coaxing demand,” IEA said.

In the U.S., demand will remain at above-trend levels through 2016. Despite the un-certainty in China’s economy and growth rate, the world's second largest oil consumer will continue to purchase

crude at current levels, IEA believes. Beijing will also buy extra crude to fill up its strate-gic reserve.

By the second half of 2016, the world will start to siphon off record-high oil stocks. Until then, the U.S. and others will experience the greatest production declines. The anticipated loss of non-OPEC output suggests that unless prices recover, “lower-cost OPEC producers would need to turn up the taps dur-

97.5

95

92.5

90

87.5

85

1 Q2013 3Q2013 1Q2014 3Q2014 1Q2015 3Q2015 1Q2016 3Q2016

mb/

d

World Oil Demand World Oil Supply

Near-Term Oil Supply, Demand

SOURCE: ENERGY INFORMATION ADMINISTRATION

THEBAKKEN.COM 9

BAKKEN NEWS

ing the second half of 2016 to keep the market in balance,” IEA said.

US Oil ReportFor the first time ever,

the U.S. Energy Information Administration is tracking U.S. petroleum supply on a monthly basis. Based on sur-vey results from participating states, the EIA is now able to provide a more accurate and timely glimpse into U.S. crude production. Adam Sieminski,

EIA administrator, said the new survey-based results is a significant improvement over the way the EIA previously reported U.S. production that relied on tax information and random production statistics provided by state agencies.

Under the new survey model, information that was once several months late or incomplete, is now more accurate and timely due to the participation of regional entities more capable of

providing accurate data. The first report issued in August included information provided by 13 states, including: North Dakota, Montana, Wyoming, California, Arkansas, Colo-rado, Kansas, Louisiana, New Mexico, Ohio, Pennsylvania, Texas and Utah. Information from the survey, which will add more state data later this year, will be used in several EIA products, including the Short-Term Energy Outlook and the Annual Energy Out-

look. In addition to produc-tion volumes by state, the EIA intends to add to its monthly petroleum report by including information on oil production by density as measured by API gravity.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Coal

Others

USA

China

Oil

Others

USA

OtherOPEC

RussianFed.

SaudiArabia

Natural gas

Others

USA

Qatar

RussianFed.

Nuclear

Others

USA

Rus. Fed.

France

Hydro

Others

USA

Brazil

Canada

China

Top Fuel Producers

SOURCE: ENERGY INFORMATION ADMINISTRATION


BAKKEN NEWS

Roughly 50 percent of all service companies operating within one of the major U.S. shale plays have seen work volume decreases, according to a survey completed by Citadel Advisory Group. After releasing its first oil and gas index survey in Febru-ary, the Colorado-based advisory group has completed and released its second survey, this time testing the perspective of the energy services sector faced with low oil prices.

“The early summer West Texas Intermediate head-fake above $60 provided some tem-porary optimism to many people in the business. We wanted to see if the current down-leg into the $40s was putting additional pres-sure on service providers, and if so, how much and what was being done to weather the storm,” said

Chris Frevert, managing director at Citadel.

To gather industry intel, Citadel opened its survey from August 11 to August 28. The survey results reveal the work volume impact oil prices have had on energy service firms and how those firms are dealing with the loss of revenue generation.

For nearly one-third of all survey respondents, price reduc-tions of 10 to 15 percent were incurred from their top three customers. Further reductions are expected as well. Nearly half of the Respondents believe reduc-tions in work compensation will be less than 10 percent in the future, while roughly 40 percent believe there will be no further price reductions.

Regardless of future service compensation reduction percent-

ages, many service firms have already had to deal with reduced revenue. The number one method for internal cost reductions has been tweaking the workforce. Nearly 40 percent of all respon-dents said they have performed workforce reductions of 11 to 20 percent and another 19 percent of respondents reported a work-force reduction effort of 21 to 50 percent. However, 19 percent also reported that they had performed zero workforce reductions. Over the next three months, 40 percent of respondents also said they don’t plan to make any further workforce reductions.

Following workforce reduc-tion, individual pay levels have been the next preferred internal cost reduction approach. Roughly one-fourth of those surveyed said worker pay has already been cut. Benefit programs have also been altered, along with a reduction in the number of company sites and

the sale of assets, according to a range of 13 to 18 percent of all respondents.

Survey respondents from the Eagle Ford represented the largest percentage at 23 percent, followed by the Permian and Niobrara, each at 18 percent. Bakken survey respondents represented roughly 10 percent of total survey partici-pant volume.

Nearly two-thirds of all enti-ties surveyed have been involved in the oil and gas industry for more than 10 years, and, the same percent of firms believes 2015 gross revenue will be less than $25 million.

The survey showed that most in the industry don’t expect oil prices to recover by year’s end. “Most of these folks have been here before, and have the knowl-edge and determination to ride this out,” Frevert said.

Shale play survey results show oil price impact on services

STATE OF THE INDUSTRYWhere do you anticipate the price of WTI to be on December 31, 2015?

At or below $5 bbl…33.3%$46 to $55 bbl…47.2%$56 to $65 bbl…16.7%$66 to $75 bbl…2.8%More than $75 bbl…0.0%

‘I think our government needs to pay more attention to the U.S. oil and gas industry and to do everything in their power to maintain a more stable market.’ -Survey Respondent from Marcellus Basin

‘Until this dreadful Iran deal was negotiatat-ed, I was expecting $75 to $80 at year end.’-Survey Respondent from Eagle Ford

ROLLING OUT NEW PLANS: Due to low oil prices, many survey respondents said workforce alterations are typically the first method of cutting costs to increase company profitability. PHOTO: THE BAKKEN MAGAZINE

THEBAKKEN.COM 11

BAKKEN NEWS

You asked for it. We delivered. DSI is your one-stop contractor with expanded services including Concrete Foundation, Walls and Flatwork, Certi�ed Pipe and Structural Welding, and Millwright services. All it takes is one call.

ONE CALL. ONE SOURCE.ONE NECK TO CHOKE.

Sioux Falls, SD | Stanley, ND | Grand Forks, ND | 605.330.0202 or 800.347.7340www.ds-integration.com

FROM CONCEPT TOT COMPLETION

AUTOMATION DIVISION | ELEC TRICAL DIVISION | PANEL SHOP | MECHANICAL DIVISION

While Energy Transfer Part-ners continues the permitting and approval process for portions of its proposed 450,000 barrels per day crude transport pipeline, Ma-trix Service Co. will be working on designing and building six crude gathering terminals for the North Dakota portion of the pipeline.

Once built, the pipeline will stretch from North Dakota to Patoka, Illinois. The pipeline will cross through North Dakota, South Dakota, Iowa and Illinois.

In North Dakota, Matrix has been awarded a contract it values at $330 million to design and

build the crude gathering termi-nals. The terminals will be located within several high production regions of the Bakken shale play. To date, terminals are planned in the North Dakota communities of Stanley, Ramberg, Epping, Trenton, Watford City and the area known as Johnson Corner.

John Hewitt, CEO of Matrix, said the company is extremely proud to have been chosen to build the terminals. En-gineering and design has already been started. Field construction should start on all six terminals by January 2016 before comple-

tion later next year. Each terminal will feature a capacity rating of 200,000 to 600,000 barrels.

Upon completion, Bakken and Three Forks producers will

have access to several markets, including the Midwest, East Coast and Gulf Coast.

Matrix contracted to build Dakota Access Pipeline’s ND gathering terminals

LIKELY SIGHT: Crude gathering locations may not all be to the scale as the image seen here, but Matrix will start working this winter to build new sites for the Dakota Access Pipeline. PHOTO: OVERLAND AERIAL PHOTOGRAPHY


BAKKEN NEWS

Dunlop_201505_OGM_03_USA_v10.indd 1 18-06-15 23:47

Calculating breakeven prices on Bak-ken and Three Forks wells can be difficult, but Justin Kringstad, director of the North Dakota Pipeline Authority, has made an attempt. To perform the analysis, he used past well performance across the oil pro-duction region to estimate well economics at various production levels. He also used key economic assumptions that include: $6 to $8 million wellhead costs, no tax incen-tives, 30-day average production rate and an internal rate of return of 20 percent to drill.

Why Bakken breakeven prices vary A $6 million well pumping 400 barrels of oil per day would break even

with oil prices at $55 per barrel, a $7 million well would break even at $65 per barrel and an $8 million well would break even at $70 per barrel.

A $6 million well pumping 800 barrels per day would break even with oil prices at $35 per barrel, a $7 million well would break even at $40 per barrel and an $8 million well would break even at $45 per barrel.

A $6 million well pumping 1,500 barrels per day would break even with oil prices at $25 per barrel, a $7 million well would break even at $30 per barrel and an $8 million well would break even at $35 per barrel.

Low production wells occur in areas that are identified as core or hot spot areas.

Risk is still present in most areas.

BREAKEVEN ANALYSIS FINDINGS:

THE PORT OF Possibility

A direct, uninterrupted route from the Paci c Rim to the U.S. Midcontinent and Canada means moving cargo more e�ciently. In fact, shipping via the Port of Vancouver USA is half the cost of shipping through the Gulf ports. We’re closer to the Paci c Rim and o�er Direct Rail Service and connections that enhance transactions and freight mobility. We’re also closer to your next success story.


PRODUCTS & TECHNOLOGY

THE BAKKENExhibiting

MOOD

THEBAKKEN.COM 15


Faced with the challenge of low oil prices and constrained operations, service companies—like Aggreko—are finding ways to stand-out.By Patrick C. Miller

The Bakken's

Although much of the oil and gas ac-tivity in the Bakken occurs in the sweet spot of the formation where production is higher and breakeven costs are lower, it hasn’t made Guillermo Barreto’s job any easier.

As Aggreko’s business development man-ager in North Dakota, Barreto sometimes hits the road at 4 a.m. from his home in Bismarck to visit the four corners of the Bakken—from Dickinson to Williston to Minot and back again—as part of a 600-mile round trip in search of opportunities.

“Because power is needed across the in-dustry, I visit with oilfield service companies, housing companies, solids control companies and operators—anybody who may need a power source or what we call critical temporary utilities,” Barreto says.

Low oil prices mean that maintaining con-

tact with Bakken-related businesses has be-come more important than ever.

“The Bakken is connected very much like the network of pipeline that covers it,” Barreto explains. “You don’t know where you’re going to find the next big opportunity. In order to actually find it, you have to turn every stone and go into every business you haven’t been in before. And even the ones you have, you never know.”

Sometimes that means spending the night in a motel when the day gets too long or the weather conditions make travel unsafe, which is why Barreto always carries an extra change of clothes in the pickup that doubles as his mobile office.

Aggreko—an international company with its national headquarters in Houston, Texas, and its primary business of providing rental power solutions, as well as heating and cooling

New Direction

MAN ON THE GO: Guillermo Barreto, Aggreko's business development manager in North Dakota, continues to scour the four corners of the Bakken in search of opportunities where the company's remote power solutions can assist a variety of businesses.PHOTO: THE BAKKEN MAGAZINE



solutions for everything from heavy industrial applications to large scale events, such as the Olympics—is one of the solu-tions that oil and gas operators turn to when needing to reduce flaring from well sites in the heart of the Bakken.

“One of the key things that Aggreko does differently is if you drive out in the field, you’ll see that there’s typically one generator per well,” Bar-reto states. “That’s what we call a non-engineered solution. A generator rental company will rent you one generator per pump jack, and that will cover your needs. But, in essence, it’s not.

“What Aggreko is good at is right-sizing engineered ap-

plications,” he continues. “Your field will experience a higher de-mand and then a lesser demand when your load changes. Ag-greko is able to scale that load up or scale that load down by adding or removing generators from the system.”

Barreto compares the ap-proach to a Lego set that can easily be built up or disassem-bled to meet the customer’s power needs. Indeed, the block-shaped components imprinted with the orange Aggreko logo appear to validate his analogy.

“We determine the electri-cal load from a facility and cal-culate the number of kilowatts needed to run the facility, then add some redundancy,” he says. “Depending on the operator,

some of them want redundancy included for 100 percent run-time. Others may not want 100 percent run time.”

On a clear fall day as the red and yellow fall foliage hugs the grassy green-fringed buttes of the Fort Berthold Reserva-tion along the south side of the Missouri River, Barreto shows off several well sites powered by Aggreko technology. Al-though each site is operated by a different Bakken producer, he stresses their similarities.

“What all the locations have in common is that they’re all engineered solutions tailor-made to handle the loads at that particular site,” he notes. “Any-where power’s not available be-cause of remoteness or a utility

can’t get it to you fast enough, that’s where Aggreko provides a solution.”

In addition to its rental power generators that can op-erate on diesel, natural gas or LNG, Aggreko also specializes in solutions that include heating and cooling control and oil-free compressed air solutions. The evolving nature of oilfield busi-nesses in the Bakken—as well as Aggreko itself—keeps Bar-reto on his toes.

“These businesses keep morphing,” he says. “What used to be a business a week ago may have bought the business next door, and now they’re into something new. With the down-turn in crude prices, a lot of the organizations have changed. It’s

PROBLEMS FLARING UP: With more drilling and production focused in the Bakken's "sweet spot," the oil and gas industry is looking for flaring solutions in areas that lack infrastructure for gas transport.PHOTO: THE BAKKEN MAGAZINE

THEBAKKEN.COM 17


realigned some structures, so you have to understand their organizations.”

For example, Barreto re-calls a Bakken operator with a midstream segment that called Aggreko’s toll-free number to inquire about oil-free com-pressed air. The company was commissioning a section of pipeline that had to meet certain specifications. As Aggreko’s North Dakota representative, Barreto handled the call.

“We sent them a compres-sor and a desiccant dryer. With-in three days, we helped the op-erator meet specifications and avoid delays. We helped them achieve their goal.”

Aggreko has found suc-cess in the Bakken not only by providing engineered power solutions in remote locations that can be scaled to meet their customers’ needs, but also in providing natural gas generators for stranded gas. This solution has provided assistance to the oil and gas industry that’s deal-ing with a gas flaring problem that has become a greater chal-lenge as producers concentrate their drilling in the formation’s high-productions areas.

With greater oil volume comes more natural gas pro-duction in an area of the Bak-ken that lacks the infrastructure to move the gas to processing

facilities on the north side of the Missouri River. The prob-lem was further compounded this year by construction delays. Rather than requiring industry to meet an 85 percent gas cap-ture goal beginning in 2016, the North Dakota Industrial Com-mission in September chose to delay the goal until Nov. 1 next year.

“The fact that Aggreko has a strong fleet built around natu-ral gas and with flaring being an issue, we can certainly be part of that solution for operators that are looking at both saving costs on fuel and controlling their flaring,” Barreto notes.

“We have the infrastruc-

ture, the hardware and the hu-man resources behind them to make it happen,” Barreto explains. “It’s typically a mat-ter of how long it takes for the operator to get us the informa-tion. Once we’re in the door, it could be the very next day or it could be as long as two or three weeks. We always try to engi-neer the best solution.”

A number of factors go into determining whether the generators supplied by Aggreko will be run on diesel fuel or nat-ural gas.

“The determining factor for either diesel or natural gas is the timeframe for utilities to get to that location,” Barreto

POWER TO THE PUMPS: In the field, Aggreko's engineered power solutions provide operators with the option of scaling up or scaling back their needs as well site conditions change. PHOTO: THE BAKKEN MAGAZINE


explains. “There are some hard-ware requirements that have an additional cost around natural gas, such as the plumbing of the gas lines from the source to the generators and the backup pro-pane line.

“You need an extended run time for that payback to occur on that investment,” he adds. “If it’s typically one to two months out to have utilities come on location, an operator will usually go with a diesel-run unit.”

If the operator wants to run generators on gas produced at the well site, it’s important for Aggreko to have accurate infor-mation to engineer the proper solution. For example, Barreto says knowing the electrical load, how many motors are running,

whether they’re on soft start or whether pump jacks have a filtration systems is key. A gas analysis is required as well.

If it’s determined that us-ing gas-fired generators makes the most sense for the custom-er, then Aggreko’s proprietary cleaning technology comes into play.

“When we take the gas—no matter where it’s coming from—it goes through our pro-prietary cleaning device called the scrubber and then it hits the engine,” Barreto explains. “We can take the gas right from the wellhead and make it work, as long as it’s within the H2S and other gas parameters.”

Another feature Aggreko provides its customers is re-mote monitoring that can spot

CAN YOU HEAR ME NOW?: Aggreko's remote power systems are monitored 24 hours a day and checked every three minutes to alert operators to potential problems, saving time and money in making repairs. PHOTO: THE BAKKEN MAGAZINE

CONSULTING.

BUILDINGS FOR SALE OR LEASE.

LAND AND LOTS FOR SALE OR LEASE.

REAL ESTATE DEVELOPMENT.

CONSULTING.

REAL ESTATE BROKERAGE.

BUILDINGS FOR SAL

BUILD-TO-SUITS.

INVESTMENT.

BUILD TO SUITS

LUNNEN CAN HANDLE ALL YOUR REAL ESTATE NEEDS IN THE BAKKEN.

701.428.1243JEFF LUNNEN

www.LunnenNorthDakota.com


problems 24 hours a day, seven days a week through a commu-nications link to the company’s operations center in Louisiana. Aggreko’s systems are analyzed every three minutes. Another feature Aggreko provides its customers is a unique service - Aggreko Remote Monitoring (ARM), a real-time asset moni-toring and dedicated diagnostic support that can detect potential or existing issues 24 hours a day, seven days a week. If a problem occurs ARM will transmit this information to Aggreko’s Re-mote Operating Center (ROC).

“We’ve invested heavily in this technology,” Barreto says. “If there’s anything that goes wrong with the system—it can be as simple as oil pressure, tem-perature, fuel level, gas pressure

or volume—ARM will send an alarm which transmits to the ROC. The team at ROC gets in touch with the field personnel to let them know that the alarm has been triggered.”

Immediately knowing the nature of the problem saves Aggreko’s customers time and money.

“We’re prepared accord-ingly to deal with the issue when we arrive on location,” Barreto notes. “It keeps our equipment proactively and preemptively running. It’s also a very distin-guishing feature from the rest of the industry.”

Even Barreto receives the notifications by email when the remote monitoring system de-tects a problem, sometimes in the middle of the night.

“As a salesman, you want to know when something goes wrong because you never like that call from the customer say-ing ‘What’s going on?’ and you don’t know,” he says. “Part of customer service is not only knowing when everything is good, but also knowing when something is wrong. It’s better for you to take the bad news to your customer rather than the other way around.”

Barreto knows that the long hours that come with trav-eling hundreds of miles a day in western North Dakota are the key to establishing good relationships with potential cus-tomers.

“We go into our meetings with an understanding of what our customers do so that we

can uncover opportunities to-gether,” Barreto says. “But even when we don’t know exactly what they’re doing, we go with an open mind to try to under-stand what they do and then see if there’s an opportunity for us to aid them in whatever they’re trying to achieve.”

And that’s how Barreto helps Aggreko maintain its edge in the remote power and gas capture field.

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


EXPLORATION & PRODUCTION

THEBAKKEN.COM 21

E&P analysts share perspective on low oil, activity levels and future expectations. By Luke Geiver

WALL STREETBakkenCoverage

For the latest oilfield catchphrase, talk with an energy equity analyst. From their offices in Denver, Houston or London, they can explain the truth behind the dead cat bounce, the DUC or the most recent term linked to oil production in the low price envi-ronment: lower for longer.

To deliver the level of insight and de-scriptive analysis on the exploration and production sector, midstreams or the energy service firms that they are tasked with cov-ering for internal or external investor clients, analysts have to know the complexities of the industry and more importantly, how to talk about it with energy CEOs and hedge fund managers alike.

To hear them in action, listen to any quar-terly financial update from any Bakken-based E&P. To understand their individual perspec-tives and what they talk about with clients re-garding oil prices, production activity and the key to keeping investors happy, we talked with

analysts from Denver, Houston and a group of industry veterans that recently formed a finance and marketing service for those com-panies in need of private capital.

Lower For Longer ExplainedSince the time Daniel Guffey, vice presi-

dent of equity research for oil and gas explo-ration and production at Stifel Nicolaus, first started covering the E&P space in 2007, the industry has completely changed. “There has been a big step change,” he says. The change has occurred in every facet of the shale space including technology, economics and manag-ing style. In the past 18 months, for example, Guffey says operators have moved to slickwa-ter fracks as a strategy to increase production. Drilling and completion times have decreased, resulting in more efficient and economic op-erations. Boardrooms are now pondering the finance of future production through cash-flow instead of debt, he adds. This evolution


INVESTORS LOOK AHEAD AT BAKKEN: According to Houston Analyst Jason Wangler, investor clients are willing to invest in the Bakken and other plays once commodity prices stabilize. PHOTO: HALCON RESOURCES


of the industry has altered the breakeven prices for many U.S. shale plays, including the Bakken.

“You don’t need $80 or $90 oil to make the plays eco-nomic,” Guffey says. “At $60 now, most of these companies are making money.” For ev-ery entity linked to the shale space, those should be wel-come words. Current oil price predictions point to the end of 2016—possibly sooner, or later—as the time when price fundamentals balance and the demand for oil once again out-paces demand. The rebalance will drive oil price back above $60, predictions show, but

until then, analysts have now turned to the term “lower for longer” to describe what ev-eryone should expect from the oil markets in the U.S.

The term holds meaning for producers and analysts each. For the production com-munity, the term explains how analysts describe the mindset of E&Ps. “Companies are get-ting leaner, overhead is shrink-ing. They are all getting more efficient as a whole,” Guffey says. “That will help them drive better returns for inves-tors and allow them to stay competitive in a low price en-vironment.”

Jason Wangler, senior vice

president and equity analyst from Wunderlich Securities, mimics Guffey’s sentiment. “A lot of folks are highgrad-ing their assets and finding a way to hunker down and get through the downturn,” he says. By now, operators have changed their strategies due to the high-probability that oil prices will not rally for the next few quarters.

The idea, as Wangler and Guffey explain, is to remain relevant knowing that oil pric-es are going to say low for the next few quarters.

Earlier this year, Wangler explains, “There was an idea that there would be a V-shape

curve where oil would be down for a bit but we would pop back up and the second half of 2015 was going to be fantastic. Now the phrase low-er for longer is a phrase that is being thrown around a lot.”

Following a brief rally in June, oil prices once again dipped. “When we saw the price go upwards of $60 we saw operators put rigs back to work. That rally was short-lived,” Guffey says. Most be-lieve the dip was a true sign


‘You don’t need $80 or $90 oil to make the plays economic. At $60 now, most of these

companies are making money.’- Daniel Guffey, vice president of equity research for oil and gas, Stifel Nicolaus

DENVER PERSPECTIVE: From his Denver offices, Daniel Guffey is near the headquarters of many Bakken entities. PHOTO: STIFEL NICOLAUS

THEBAKKEN.COM 23


COMPANY FOR CURRENT CONDITIONSA team of industry veterans made up of former

Goldman Sachs representatives and crude marketing and logistics experts have formed a new company that links the financial backing of Wall Street with the in-dustry knowledge of Houston. HudsonField—Hudson referring to New York City’s Hudson River and Field referring to the oilfield—is the brainchild of Ben Free-man, Scott Bormaster and a handful of others. The new firm has experts well-suited to work with oil producers in need of help due to the current oil price environ-ment.

According to Freeman, the company can provide financing to any production entity looking to pay down existing debt or drill new wells. It can also provide hedging expertise or market crude. “We see financ-ing as a very important tool we can engage our clients with,” Freeman, CEO and former Goldman Sachs man-aging director and global head of oil derivatives trad-ing, says. “A really important point for our business is that we are client aligned. We are not in the upstream business,” he adds. “Low sustained oil prices for the better part of this year means our services are more in demand than if oil was trading around $100.”

Scott Bormaster, president of marketing and trans-portation and former vice president of oil business de-velopment for Buckeye Partners LP, has an example

of how HudsonField’s ex-pertise can shine during the current price cycle. By working with clients in any of the major U.S. basins, Bormaster believes he has the chance to save them transport costs due to infra-structure upgrades, addi-tions and space allowances that weren’t present until recently. In the Bakken, rail will give way to pipeline, he says. Some major pipelines currently have free space, giving producers who can find a way to tap into that unused capacity an economic alternative or in some cases, an advantage, even if the profit from switching between rail or pipeline is small. “At $100/b, produc-ers don’t care much about a few pennies. When it is $40/b,” Bormaster says, “every penny counts.”

INDUSTRY VETS, FINANCE EXPERTS: Scott Bormaster and the rest of the HudsonField team will use experience in the field and from Wall Street to meet the unique financing needs of E&P clients. PHOTO: HUDSONFIELD

The BAKKEN MAGAZINE OCTOBER 201524AP-7517

SAVE up to 50%over Timber Mats

Call 800-548-3424 for Pricing

GEOTERRA® Mats — A good earth solution.

WET SOILS? No Problem.Strong, Safe, Fast-to-Deploy Portable Mats

www.geoterra.com

PRESTO

CALL FOR PRICING.

IN STOCK IN THE DAKOTAS!CALL FOR PRICING.

IN STOCK IN THE DAKOTAS!

FAST: Quick to Deployand Install

SAFE: Installs withoutHeavy Equipment

STRONG: Five timesH-20 loading


that the global oil markets are out of balance.

What Investors Want“The investor perspective

has ebbed and flowed,” Wan-gler says.

At the beginning of the year there was strong interest and a high volume of money being infused into the oil and gas industry, he says. Success-ful equity raises in April by several firms proved that.

Today, the energy shops and hedge funds that Wangler talks too say they are under-weight in energy because it is an “ugly space,” with too much uncertainty right now.

“I would say the interest is still really high and it is as high as it was several months ago, but the actual capital be-ing deployed is much lower,” Wangler says.

Investors that are active in the shale space do have par-

ticular desires. The collective mood from investors has been to stick with those entities that have good balance sheets, Guffey says.

From producers, inves-tor clients of Wangler’s want to see production stay flattish throughout 2015. “Being able to do that within cashflows and use outside financing is important,” he says. “I think that is about as good as you could do right now. You can

‘A lot of folks are saying that when this comes out they will have their pocketbooks ready.’

- Jason Wangler, senior vice president and equity analyst, Wunderlich Securities

FROM HOUSTON TO WALL STREET: Before covering E&Ps, Wangler worked in Houston for a reservoir analysis firm.PHOTO: WUNDERLICH SECURIITIES

THEBAKKEN.COM 25

Office: 406.892.1535Fax: 406.892.9060

Email: [email protected]

99.9% EFFICIENCY GUARANTEE10MM | 15MM | 30MM | 45MM BTUTORRID FRAC WATER HEATERS

IT'S NOT ENOUGH TO JUST HEAT THE FRAC ANYMORE ...

YOU HAVE TO BE EFFICIENT TOO.

> NOW TAKING PURCHASE ORDERS <

Contact us for a heating demonstration


hunker down, you can see production at flattish levels and when you get out of this you can see production growth when a rally does come.”

In today’s market, Guffey says, “a strong balance sheet has gone from be-ing a premium to being a necessity if you want your stock to hold up.”

Despite the best balance sheet ma-neuvers and strategies, some investors are not willing to play in the shale space. “From an investor standpoint, a lot of it has to do with the stability of the com-modity,” Wangler says. But, when oil prices do stabilize, things could change quickly. “A lot of folks are saying that when this comes out they will have their pocketbooks ready.”

Analyst Predict Activity Like most analysts that cover the

oil industry, Guffey believes the balance needed to stabilize oil prices will not occur until 2017. Excitement amongst investors will happen well before that balance actually occurs, however. “You just need a line of sight about the bal-ance and the price at which it occurs,” he says. When that balance is in sight, many investors—along with produc-ers—will make moves to become ac-tive in the space again. “U.S. production has been the lever that has been pulled shut the quickest,” he says of global oil production. “It will also come back the quickest.”

Wangler believes oil prices have to be significantly higher to maintain global supply, and, that OPEC will eventually refocus on making money and abandon its moves to defend marketshare. “They don’t produce corn or export goods,” he says. “Oil is what they do.”

Neither Wangler or Guffey believe drilled but yet to be completed (DUCs) wells will add enough production to the North American totals once they are completed. And, the possibility of ex-ploration in emerging basins is unlikely, even when a price rally takes place.

“Even without going and finding

new basins, there is a lot of potential to go out and recover more oil within your basin,” Guffey says. “It is not traditional exploration. It is about doubling your re-source potential.”

When a price rally does occur, Wan-gler is not concerned with the availability of capital to producers in need of fixing balance sheets or paying for new produc-tion. That reality shows the true nature of the shale space and why he and his clients

are anxious for the impending activity ramp-up and resurgence of the industry. “There is still plenty of energy,” he says. “Energy is always an exciting space.”

Author: Luke GeiverEditor, The Bakken [email protected]


The BAKKEN Magazine Marketplace

Contact us:Johnson Controls2320 12th Street NorthFargo, ND 58102701-293-1140

Commercial HVAC Industrial refrigeration Temperature controlsSecurity & fire safety Frick® factory service

E3 Power & WaterGeneration Efficiency1-844-337-6937

Introducing the latest Technology in Remote Utilities Fully Engineered Power & Water Delivery System

Increase Efficiency, Profits and ProductivityCall us today and visit our website:

www.e3pw.com

Save Money, Time, and Space

.com

45,000ONLINEADVERTISINGAdvertise Today &Track Your Results

Documents

The Bakken Magazine - October 2015