newsNovember 2014 – January 2015 Explorers of Houston Volume 68, Number 4 www.pesa.org Honors Whiting Petroleum Corporation for Excellence in Technological Innovation & Leadership Upcoming Events PESA’s Explorers of Houston Committee, chaired by RobertForeign Service Officers Training Workman of DistributionNOW, honored Whiting Petroleum April 6 – 9, 2015 with the 2014 Explorers of Houston Award. Whiting Chairman, Houston, Texas President and CEO James Volker recognized members of his executive team, Rick Ross and Mark Williams. 2015 PESA Annual Meeting April 22 – 24, 2015 The Ritz-Carlton Lodge at Reynolds Plantation Greensboro, Georgia 2015 Oil & Gas 101 May 20 – 21, 2015 A Comprehensive Overview of Oil & Gas Production Westin, Memorial City Houston, Texas Find all of our upcoming events at www.pesa.org. In This Issue Each November, the PESA Explorers of Whiting Chairman, President and CEO, Houston Committee honors an exploration James Volker recognized members ofExplorersofHouston.....Pages1&3 and production company that demonstrates his executive team, Rick Ross and MarkChairman’s Letter................Page 2 excellence in technological innovation and Williams, during the November 19 receptionPESA Perspective................Page 3 leadership in the industry. at Lakeside Country Club.Customer Insights..............Page 4 PESA’s Explorers of Houston Committee, Whiting is an independent oil and gasExecutive Coaching & Leadership chaired by Robert Workman of company that develops and explores forDevelopmentSeminar.........Page5 DistributionNOW, honored Whiting crude oil, natural gas and natural gas liquidsWomen’s Global Leadership Petroleum with the 2014 Explorers Award. primarily in the Rocky Mountain, PermianConference.........................Page5 Basin, Mid-Continent, Gulf Coast andMethane Emissions.............Page 6 Whiting Petroleum: Michigan regions of the United States.FrackingBans......................Page7 Maximizing Recovery Efficiency The Company’s largest projects are in theEffectiveTaxRates................Page8 Bakken and Three Forks plays in North Improving Hidden Bench Production Rates Dakota and in Enhanced Oil Recovery fields1240 Blalock, Suite 110 21% Increase Over 90 Days in Oklahoma and Texas. Production in theHouston, Texas 77055 third quarter of 2014 totaled a record 10.7 As of September 30, 2014 million barrels of oil equivalent, of whichwww.PESA.org 88% was crude oil and natural gas liquids.713.932.0168 With the acquisition of Kodiak Oil & Gas Corp., Whiting Petroleum created a newConnect With Us top producer in the Bakken Shale and Three Forks formations. These two companies1 PESA News together produced 107,000 barrels a day of oil equivalent in North Dakota and Montana —Customer Recognition continued on page 3.2015 Winter.indd 1 3/6/2015 1:06:29 PM
Chairman’s Letter Paul Coppinger This is a challenging time for our sector of the industry and with the increased financial PESA Chairman hardships it is even more critical that we use our unified voice and turn up the advocacy Divisional Managing Director, efforts. The price of oil trading at a six-year low bolsters the need for broad crude exports, Weir Oil & Gas pro-growth tax policies and a responsible regulatory environment. We are looking to lawmakers to use hearings and legislation to turn up the heat on PESA Officers regulators, and are taking that message to state capitols and Washington, D.C. Unnecessary 2014-2015 hurdles in the path of our industry’s economic development will only serve to hinder the American energy renaissance. Paul Coppinger Congressional leaders must use legislative and/or legal action to temper some of the PESA Chairman administration’s regulatory zeal as it considers clamping down on methane emissions, Divisional Managing strengthening standards for hydraulic fracturing and requiring unattainable ozone metrics. Domestic drilling advances have been a bright spot for the U.S. economy, and our Director industry is a leader in self-regulation, constantly maintaining a focus on the Health, Safety Weir Oil & Gas and Environment goals of each member company. We took this message to Austin and Gary Halverson Washington, DC in February, and will continue to speak on behalf of the oilfield service and PESA Vice Chairman supply sector. Senior VP & President Drilling & Production Paul Coppinger Systems PESA Chairman Cameron Divisional Managing Director, Weir Oil & Gas Johan Pfeiffer PESA First Vice PESA Perspective President Vice President Industry leaders from more than 200 member companies are Surface Technologies represented at PESA events. We hope to have seen you at FMC Technologies, Inc. one of the many events this Winter and if not, there are plenty David Warren more opportunities to get involved with us this Spring. PESA Treasurer President & Chief PESA’s Annual Meeting gives members the opportunity to Executive Officer engage with customer company executives and industry Energy Alloys peers in an intimate environment. This year’s agenda will deliberate how both operators and suppliers can effectively2 PESA News collaborate on the opportunities and challenges faced in the upstream industry with unconventional resource plays and deepwater developments. PESA President PESA committee chairmen plan targeted seminars throughout Leslie Shockley Beyer the year to cover emerging trends in the industry, and the events planned for 2015 cover a host of issues. For the first time in our history, the Emerging Leaders are sponsoring a year-long leadership program for member companies’ high performers. Throughout 2015, participants have access to a professional executive coach and leadership development opportunities that will enhance their professional development. I hope you will visit www.pesa.org to see what resources are available to our members. Please let me know how we can most effectively serve you. Leslie Beyer PESA President PESA News is published by: PESA President Petroleum Equipment & Leslie Shockley Beyer Services Association PESA Director of Communications 1240 Blalock Rd., Suite 110, Houston, Texas 77055 Molly Smart 713-932-0168 © 2015, PESA2015 Winter.indd 2 3/6/2015 1:06:31 PM
Customer Recognition ContinuedPESA President Leslie Beyer, PESA 1st Vice President Johan in the first quarter. As a combined entity, the companies arePfeiffer of FMC Technologies, PESA Director Scott Dubois of poised to surpass already industry-leading efficiencies.Premier Pipe and Rick Ross of Whiting Petroleum Despite the recent pullback in oil prices, this team is confident in their outlook for continued strong growth in production and reserves. Efficient operations and leadership in the implementation of new completion technologies have enhanced the capital productivity of Whiting’s asset base, helping to offset the impact of lower prices. This technology focus is leading to increased productivity and a larger drilling inventory. PESA members are proud to partner with companies like Whiting Petroleum that promote the development of innovative technologies that have led to a resurgence of energy supply in the U.S. Whiting Chairman, President and CEO James Volker will participate in the Onshore Panel at PESA’s Annual Meeting April 22-24, 2015.Federal Regulations New proposal shows lack of commitment to ensuringin effect as of Jan. 1: America’s position as a world leader in energy— Natural gas producers have to January 27, the Obama administration new five-year offshore drilling proposallimit emissions of smog-forming outlined a politically fraught plan for was a “balanced” approach, and shevolatile organic compounds using allowing oil drilling in U.S. coastal stressed that it was still only a draft.\"green completions\" at well waters, announcing steps to open parts But she praised it as a “balancedheads. of the southeastern U.S. coastline for oil approach to oil and gas development” leasing while imposing new restrictions that allows for possibly opening up— The EPA's modified greenhouse on waters off Alaska’s North Slope. nearly 80 percent of discoverable andgas reporting requirements for the recoverable resources in federal waters,oil and gas sector go into effect, “The service and supply sector has “while protecting areas that are simplyrevising calculation methods a proven record of developing and too special to develop.”and monitoring and reporting applying the technologies that allow for The proposal would implement a 50-requirements. increased efficiencies and minimization mile buffer to keep drilling away from of environmental impact in offshore the Atlantic states’ coastlines, an effort— CSAPR: The “good neighbor” production. While we are pleased to to address concerns about the impact onrule, “transport” rule or the Cross- see the administration addressing tourism, military training, offshore windState Air Pollution Rule, whatever America’s offshore energy potential and wildlife, Jewell said.you’d like to call it. While the by increasing access to new areas in Alaskan Senator Murkowski said that theSupreme Court generally upheld its proposed five-year plan, opening Obama administration “has effectivelythe SO2 and NOx pollution access to all areas of the OCS, including declared war on Alaska” through acaps for some power plants in the Eastern Gulf of Mexico, the mid- trifecta this week of blocking ANWR28 states, there are still issues Atlantic, and Alaska’s waters will best drilling, withdrawing the areas off Alaska’sbefore the appellate court. Oral utilize the energy resources we have coast and instituting new mitigationarguments are scheduled for 9:30 right here at home in a responsible requirements for ConocoPhillips’a.m. Wednesday, March 11, at the way,” said PESA President Leslie Beyer. operations in the National PetroleumU.S. Court of Appeals for the D.C. Reserve-Alaska.Circuit. In August 2014, PESA joined IPAA, API, House Energy and Commerce Chairman NOIA, and seven other energy trade Fred Upton (R-Mich.) summed up the— DOI’s Bureau of Ocean Energy associations in submitting comments views of many Republicans and theManagement is raising the liability to the Obama Administration in industry: “While this plan is a welcomelimit for offshore oil spill-related preparation of the 2017-2022 offshore thaw in the administration’s drillingdamages, to about $134 million leasing program. moratorium, it still doesn’t go farfrom $75 million. The increase is enough,” he said.the maximum jump allowed under Interior Secretary Sally Jewell said thethe Oil Pollution Act of 1990, said 3 PESA NewsBOEM, which first proposed theincrease in February.2015 Winter.indd 3 3/6/2015 1:06:32 PM
Customer InsightsOccidental PetroleumThe 2014 Gulf Coast – Texas District Meeting held December11, featured Vicki A. Hollub, President, Occidental Oil &Gas – Americas.Gulf Coast – Texas District Chairman operates the giant Caño Limón Field,Burk Ellison of DistributionNOW an Occidental discovery that enabledinvited Vicki Hollub to address PESA Colombia to become an oil exportermembers at the December meeting. after many years as a net importer. More than 1.2 billion barrels of oilMs. Hollub shared an overview of the have been produced at Caño Limóncompany and their 2015 outlook. since Occidental discovered the field in 1983.Occidental’s (OXY) Permian acreageis approximately 1.9 million net acres, In the Middle-Magdalena Basin, Vicki A. Hollub, President, Occidental Oiland a major focus area for OXY as far Occidental has a working interest in & Gas – Americasas capital spending is concerned. the La Cira-Infantas (LCI) Field, which it operates in partnership with Ecopetrol.Gas processing plants and CO2 LCI is an improved oil recovery (IOR)fields and facilities project with large remaining reserves.Under this segment, Occidental With the decline in oil prices, Colombiaprocesses wet gas to extract NGLs and is going to be more focused on tryingother gas byproducts like CO2, and to capture conventional, and pluggingdelivers dry gas to pipelines. the barrel quicker. Their conventional plays are ready to develop and areThe company earns margins on the marked for moderate growth.basis of the difference between theinlet costs of wet gas and market Rising Cost of Production Gulf Coast – Texas District Chairmanprices for NGLs. Major growth projects Burk Ellison of DistributionNOW andin this segment include the Al Hosn Occidental is looking to the service Vicki A. Hollub, President, Occidental Oilgas project in Abu Dhabi. and supply sector specifically forCO2 plays have a better return on shale completion techniques that & Gas – Americascapital than shale plays over the larger provide increased efficiencies and costproject which leads to better earnings. reduction. the good times are even better.Oxy expects to be in the PermianBasin for a long time and wants to Focus on Efficiencies Permian CO2 operations are verywork better with the service and supply efficient. Unconventional drilling needscompanies to get through this difficult Industry sometimes loses discipline to be a little more efficient. Executiontime and be successful. around the efficiency of operation, on the capital programs has room for especially with oil prices around improvement. This industry has goneStrategy in Columbia $100 we tend to become sloppy. The thru downturns. We’ve tended to deal industry tends to enjoy the good times with low prices by lowering activity,Occidental has been an active when prices were good, and not really rather than improving efficiency. Then,investor in Colombia for more thanfour decades. In Arauca, Occidental buying into or committing yourself to when we prices begin to rise again, we the fact that if you are always efficient are just as inefficient as the last upturn. Iraq and Syria/Counter- ISIL Engagements Immediately before the Gulf Coast - TX District meeting on December 11, PESA held a small briefing opportunity with Rick Westerdale, Director of the U.S. State Department’s Energy Resources Bureau's Policy Analysis and Public Diplomacy Office (pictured at left). Rick discussed issues surrounding Iraq and Syria/Counter-ISIL engagements, including oil smuggling and revenues in relation to regional oil trade.4 PESA News2015 Winter.indd 4 3/6/2015 1:06:33 PM
Executive Coaching & LeadershipDevelopment SeminarThe PESA Emerging Leaders the next level. 2015 PESA Executive Leadership Class ElementsCommittee announced a year- “High potential leaderslong leadership program for need to invest in their own • Attend 2 PESA Executive Leadership Seriesmember companies’ high development, and not wait meetings in 2015performers. This program is for their employer to providebeing delivered, in part, by training,” said Mueller. • Attend an orientation webinar and three leadershipSOLID Executive Coaching, Following the seminar, webinarswhich specializes in growing attendees had the opportunityhigh potential executives and to join the 2015 PESA Executive • Complete all professional developmentemerging leaders. Leadership Program. This recommendations through customized PESA/On January 20, 2015, the is a yearlong, multi-faceted SOLID online portalprogram got off to a great leadership developmentstart, as fifty PESA members program for high potential • Personal Assesment Tools: DiSC, Myers-Briggs,engaged in a interactive, leaders wanting to accelerate Emotional Intelligence and Strengths Finderhalf day Executive Coaching their skills and abilities. Included& Leadership Development are a self-coaching cloud-based • Gain 1 leadership mentor (self-identified); have atSeminar. Daniel Mueller, systems, tools, and resources, least 3 meetings with mentor in 2015President & CEO of SOLID leadership and behavioralExecutive, led the workshop, assessments, coaching, • Individual career assessment session withwhich provided practical tips webinars, and mentorship. A executive coach Daniel Muelleron every aspect of leadership certificate of completion willfor the high potential leader be awarded after program • Leadership development outside your companywanting to take their career to requirements are met. through community or PESA involvementWomen’s Global Leadership ConferencePESA was proud to serve as a schools focused on science.supporting organization for theWomen’s Global Leadership “The goal of the IPAA/PESAConference (WGLC) in Energy Energy Education Center is toNovember 4 and 5. collaborate with the public school system, making STEM educationWomen have been under- more meaningful and relevantrepresented in the field of science for today’s students. Anotherthroughout the ages, especially in priority is to actively recruit themedicine and engineering. next generation of engineering and geosciences professionals,”In the 1970s and ’80s, female said PESA President Leslie Beyer.engineers began to dot the oiland gas industry’s landscape, and “Together with the supportmore female doctors were seen of the Petroleum Academyin hospitals. But they were few. Petroleum Academy students from the Young Women’s Education Advisory Board andToday, this is changing. College Preparatory Academy visited WGLC. critical corporate and individualBoth industries and other science-related fields are sponsorships, the center iscontinuing to struggle to fill the huge number of jobs. achieving an unprecedented level of success preparing theCompanies have become creative, recruiting overseas, next generation of industry leaders, specifically women,”other industries and looking at the female population for Beyer said.positions by collaborating with schools, supporting events, One school, HISD’s Petroleum Academy at Young Women’sproviding workshops, all to recruit young girls and boys into College Preparatory Academy, is a high school level, all-girlsscience. engineering/geoscience academy that will help change the demographics of the industry. Students from the YWCPAThe most promising answer to fill the shortage of labor in attended the WGLC.science-related industries has is supporting and/or opening 5 PESA News2015 Winter.indd 5 3/6/2015 1:06:35 PM
New Study Finds Decrease inMethane Emissions from Fracking“Through disciplined engineering and smarter wells, PESA Member Companies are drivingefficiencies that minimize the environmental impact in the communities where we live andwork,” said PESA President Leslie Beyer.Methane emissions from natural gas production — including and Utica shale regions in Ohio and Pennsylvania.hydraulic fracturing — are lower than previously thought,according to a new study from researchers at the University In September, the EPA said that methane emissionsof Texas. The research was done in close coordination decreased 12 percent since 2011, and methane releasedwith the Environmental Defense Fund (EDF), a major U.S. from hydraulic fracturing operations has gone down 73environmental organization. percent since 2011. And in November, the EPA finalized oneThe study, published December 9 in two parts in the journal rule and proposed another boosting methane reportingEnvironmental Science & Technology, finds that methane requirements under the GHG reporting program.emissions from the upstream portion of the supply chain areonly 0.38 percent of production. That’s about 10 percent Estimated Annual Emissions: Upstream Natural Gas Production Sector in the U.S. (Gg Methane)lower than what the same research team found in a study Completion Flow Backsreleased in September 2013. The researchers also noted 24that a small number of sites accounted for the majorityof emissions, suggesting that technologies already in use Chemical Pneumatic Non-Plungeracross the industry are effectively managing methane Pumps 80leakage. 73 Controllers 600A chart (shown right) accompanying the research shows Unloadings Plungertotal methane emissions of 2,185 gigagrams (Gg), or 270 (<100 events/yr) 40approximately 0.38 percent of total natural gas withdrawalsand production in 2012, according to data from the U.S.Energy Information Administration. Other Sources Equipment Plunger LiftEnergy In Depth released a report showing declines in 911 Leaks (>100 events/yr)methane emissions in many shale basins across the country, 307 150including the Permian Basin and Eagle Ford region in Texas;major producing areas in Oklahoma; and in the MarcellusArkansas: U.S.’s Fourth LargestShale ProducerArkansas is now the fourth-largest shale gas producerin the U.S., accountingfor 2.8 billion cubic feetper day, or 9 percent, ofproduction in 2013. Figuresfrom the Energy InformationAdministration’s NaturalGas Annual report put thestate behind only Texas,Louisiana, and Pennsylvaniain production of shale gas. 6 PESA News 3/6/2015 1:06:35 PM2015 Winter.indd 6
Interior Secretary: Local FrackingBans Are ‘Wrong Way To Go’In a January interview with a northern-California public TV and radio outlet KQED,Interior Secretary Sally Jewell said that local fracking bans are “the wrong way to go.” She spoke only weeks after New York this and they want to make sure any kind imposed a fracking ban, a decision the state of oil and gas activity is done safely and justified by citing a much-criticized state responsibly in terms of their water supply department of health report on the supposed and in terms of their communities. That is negative public-health consequences, an industry responsibility,” Jewell said. “I’ve including “community impacts associated made it very clear to industry that it’s not my with boom-town economic effects.” job to defend their practices; it’s their job to Though Jewell did not directly address both ensure their practices are safe and then New York’s fracking ban, she told KQED, communicate with communities that their that “there is a lot of misinformation about practices are safe.” fracking. I think that localized efforts or “The oilfield service and supply companies statewide efforts in many cases don’t of PESA have long prioritized safety, understand the science behind it and IInterior Secretary Sally Jewell think there needs to be more science,” said responsibility and community impact in Jewell. their operations, and continue to hold “They (the public) are concerned about themselves to the highest standards,” said PESA President Leslie Beyer.New York Bans Fracking Key TakeawaysNew York Gov. Andrew M. Cuomo’s administration announced December 17 that WALL STREET JOURNALit plans to ban hydraulic fracturing in New York State because of what regulators “The truth is that fracking has beensay are its unexplored health risks and dubious economic benefits. taking place around the country“Unfortunately, the decision in New York was based on politics, not fact. Benefits for many years without evidencederived from the domestic production of oil and natural gas through the use of environmental harm. Even theof hydraulic fracturing are far from ‘dubious’ and include sustained creation of federal EPA, which desperately wantsmillions of jobs for hard working Americans, greater geopolitical strength and to find it, has uncovered no crediblelowered energy prices. Minimization of environmental impact in the communities evidence that fracking causeswhere we live and work is a top priority for the sector, and the energy resurgence groundwater contamination.”of our country will continue,” said PESA President Leslie Beyer. NY DAILY NEWSNew York’s Department of Health (DOH) “reviewed and evaluated relevant “[Acting NY State Healthemerging scientific literature investigating the environmental health and Commissioner Howard] Zucker oncommunity health dimensions of HVHF.” Most of that literature, however, has Wednesday acknowledged there isbeen either discredited or shown to have exceedingly faulty methodologies. no conclusive research that frackingInterestingly, when discussing these studies, DOH admits they actually didn’t have is harmful.”any evidence to link hydraulic fracturing to health impacts. DENVER POSTThis decision based on faulty methodologies is directly affecting people in the “Energy is critical to civilization, soSouthern Tier of New York. Gov. Cuomo said that there was “no doubt” the Gov. Andrew Cuomo banned a majorSouthern Tier needed economic development, but that it could not come at the technology vital to its production.”expense of public health as reported by The New York Times. Frederick Russell, a NEW YORK POST60-year-old from Binghamton in the Eastern Southern Tier, said the decision “was “Twice since 2009 the Departmentlike a whammy. It was like ‘Well, Binghamton, you’re so far down we don’t care of Environmental Conservation hasabout you anymore, so just disappear.’ ” been prepared to allow fracking,On January 5, residents of New York’s Southern Tier gathered to protest the with safeguards, in New York.recent decision. The event, organized by the Joint Landowners Coalition of New What stopped them was politicalYork, was standing room only and brought together landowners, business owners, intervention.”elected officials and local unions—all frustrated with the decision that came aftersix years of delays. 7 PESA News2015 Winter.indd 7 3/6/2015 1:06:36 PM
U.S. Oil and Gas Field First Class Equipment Exports US Postage PaidTop 15 Destinations for Q4 2014 (in U.S. $1,000) 1240 Blalock Road, Suite 110 Houston, TX Houston, TX 77055 Permit No. Oct. Nov. Dec.Mexico 87,196 48,077 156,130 04805Korea 44,981 35,612 50,227Venezuela 6,146 35,835 48,884Argentina 5,155 6,714 44,662Brazil 37,374 18,462 40,160Nigeria 43,636 13,104 36,923China 26,644 32,914 32,473Russia 36,507 33,010 30,054Singapore 40,450 27,474 29,263Bahamas 0 0 28,750Canada 17,620 14,083 19,932Saudi Arabia 21,554 16,349 18,689Angola 25,889 20,024 16,102UAE 23,729 17,725 15,743UK 15,416 18,329 14,783Subtotal : 432,299 337,712 582,775All Other: 235,408 192,790 158,989Total 667,706 530,502 741,764Sources: U.S. Department of Commerce & theU.S. International Trade CommissionEffective Tax Rates Among IndustriesThe high effective tax rates associated with the oil and gas This is why the industry has an effective tax rate above theindustry are a function of the nature of business according federal statutory rate of 35 percent. Retailers are placed into a report published by API. a similar situation as they must naturally align their locationsU.S. based oil and gas companies must structure their with customers, which can lead to higher effective tax rates.operations and invest substantial capital where the resource Other industries, though, may have greater flexibility onis found rather than where the best tax regime is located. As where they locate their physical capital or other operationsa result, U.S. based oil and gas companies’ overseas income to meet their customer needs. As a result, they may be ableis often subject to very high effective tax rates. In addition, to establish activities in locations with lower effective taxoperations in the U.S. generate state income tax obligations rates.or payments, which are in addition to federal taxes.Averaged over 2008 — 2013 Retail Computer and Oil and Gas Peripherals Media 25.6% 37.5% Pharmaceuticals 22% 44.5% 21.2% 16.9%Insurance 35% 32.3% 14.5% Industrial Conglomerates Health Care Utilities Provider ServicesTax rate is total income taxes, which include income taxes imposed by federal, state, and foreign governments, divided by pretax income.Source: S&P Research Insight; S&P 1500 by GICS Industry Code; API.8 PESA News2015 Winter.indd 8 3/6/2015 1:06:36 PM
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