Oilman Magazine Jan/Feb 2018 : simplebooklet.com

IN THIS ISSUEFeature2018 Oil & Gas Market OutlookBy Samuel Cook - pages 20 and 21In Every IssueLetter from the Publisher – page 2OILMAN Contributors – page 2OILMAN Crossword Puzzle – page 3OILMAN Online // Retweets // Social Stream – page 4Downhole Data – page 4Product Showcase – page 16OILMAN Crossword Puzzle Answers – page 17— OILMAN PRIDE —Oklahoma City Oil Field, State Capital Building, OK – pages 5 & 6— OILMAN COLUMNS —Steve Burnett: Oilman Cartoon – page 3Thomas G. Ciarlone, Jr.: Oil and Gas Law: 2017 Year in Review – page 7Louisiana Oil & Gas Industry Overview – page 8Paul Azores: New Accounting Standards May Bring Vehicles Leases on Your Balance Sheet – page 10Mark A. Stansberry: Energy Efciency and Environmental Preservation – page 12Eric R. Eissler: Drilling Technology Knows No Bounds – page 13Clara Fuge: From Siloed Data to Integrated Capabilities – page 15Tara Malhotra: South Asia Region Becomes Global LNG Hotspot – page 18Josh Robbins: 3 Ways To Sell Your Oil & Gas Assets Quickly – page 19Tim McNally: Navigating Mineral Rights? Don’t Be Scared by the Complexity – page 22Sundeep Sanghavi: Savings Across The Board: How Anomaly Detection & Prediction Improves Business Performance In Oil And Gas – page 23Tim McNally: Interview with Giles Edward, CEO, M-Flow – page 24Don Briggs: Changing Headlines – page 25Brad McMillan: Oil Prices Collapse: Is the Energy Industry Going Back to the Future? – page 26MarketsandMarkets, Inc.: Articial Intelligence: The Future of Oil & Gas – page 27Jason Spiess: Gov. Burgum’s Ambitious Challenge to Bakken Producers and Investors – page 28Oilman Magazine / January-February 2018 / OilmanMagazine.com1MONDAY MORNINGS CAN BE UNPREDICTABLE.YOUR WORKERS’ COMPENSATION COVERAGE SHOULDN’T BE.Trusted ﬁnancial stability and unparalleled customer experiences, brought to you by Louisiana’s Highest Rated Workers’ Compensation Company.LWCC17-05- Louisiana Oilman.indd 1 8/25/17 1:33 PM

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Don BriggsDon Briggs is the President of the Louisiana Oil and Gas Association. The Louisiana Oil & Gas Association (known before 2006 as LIOGA) was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana; this representation includes exploration, production and oileld services. Our primary goal is to provide our industry with a working environment that will enhance the industry. LOGA services its membership by creating incentives for Louisiana’s oil & gas industry, warding off tax increases, changing existing burdensome regulations, and educating the public and government of the importance of the oil and gas industry in the state of Louisiana.Mark A. StansberryMark A. Stansberry, Chairman of The GTD Group, is an award-winning author, columnist, lm producer, radio talk show host and 2009 Western Oklahoma Hall of Fame inductee. He has been involved in the oil and gas industry for over 39 years. He is currently serving as Chairman of the Board of the Gaylord-Pickens Museum/Oklahoma Hall of Fame, Vice Chairman of the Board of Regents of the Regional University System of Oklahoma, Board of Directors of OKC Port Authority, Board of Governors of the Recording Academy/Grammys Texas Chapter, Lifetime Trustee of Oklahoma Christian University and Board Emeritus of the Oklahoma Governor’s International Team. He has served on several private and public corporate boards.Jason SpiessJason Spiess is an award winning journalist, talk show host, publisher and executive producer. Spiess has worked in both the radio and print industry for over 20 years. All but three years of his professional experience, Spiess was involved in the overall operations of the business as a principal partner. Spiess is a North Dakota native, Fargo North Alumni and graduate of North Dakota State University. Spiess moved to the oil patch in 2012 living and operating a food truck in the parking lot of Macís Hardware. In addition to running a food truck, Spiess hosted a daily energy lifestyle radio show from the Rolling Stove food truck. The show was one-of-a-kind in the Bakken oil elds with diverse guest ranging from U.S. Senator Mike Enzi (WY) to the traveling roadside merchant selling ags to the local high school football coach talking about this week’s big game.Joshua RobbinsAt Beachwood Marketing Group, our mission is to market oil and natural gas properties in the most cost effective and efcient way. We strive to provide excellent leadership and unparalleled service for each of our clients. Josh has been instrumental in dening Beachwood’s market leading solutions and has overseen the company’s expediential growth. Josh is also an accomplished writer on the acquisition and divestment market and a speaker and presenter at conferences. He continues to keep his focus on the strategic direction of Beachwood Marketing Group and its expansion into new markets.Thomas G. Ciarlone, Jr.Tom is a litigation partner in the Houston ofce of Kane Russell Coleman Logan PC, where he serves as the head of the rm’s energy practice group. Tom is also the host of a weekly podcast on legal news and developments in the oil-and-gas industry, available at www.energylawroundup.com, and a video series on effective legal writing, available at www.theartofthebrief.com.Steve BurnettI was raised in a small West Texas town where the school mascot is a roughneck. Growing up with a roughneck as the town symbol, how could I not spend most of my adult life working in the petroleum industry? I started working in the oilelds age 16. In Texas you had to be 17 with a signed minors release from your parents, but my parents were glad to keep me working. I had been working since my rst job working on a commercial elephant garlic farm at age 12. By the time I reached 16, I had enough work experience to prove I knew how to hold my own on a work crew. Anybody whose parents survived the great depression can attest to the fact that their children learn the value of a solid work ethic.Phil GravesPhil Graves has spent nearly a decade working in the oil and gas industry. He has served as Director of Sales and Director of Digital Development for a large national industry publication and has held various management positions with a completions company and was in charge of operations in the Permian Basin and Eagle Ford shale. Phil now runs a marketing and photography company focused on providing vivid images of the industry at work in multifaceted disciplines and projects.Looking back at the past twelve months, our industry has revealed fantastic gains in the U.S. shale market. Overall drilling permits are up 63 percent in Texas and drilling rigs rose 88 percent, according to the Baker Hughes Rig Count. The Permian Basin eld in Texas continues to be a major player, followed by the STACK and SCOOP elds in Oklahoma. Rig count in Oklahoma and Louisiana increased 48 and 29 percent, respectively. The decline in exports and the rise in crude demand resulted in reduced oil stockpiles, which in turn stabilized the market. As a result, the price of WTI crude oil hovered around $50 a barrel for most of 2017 and ended with just above the $60 mark. However, while the market was stabilizing in 2017, many of the companies that directly support the oil and gas industry were still experiencing the effects of the prior three-year downturn, many had to merge with competitors to survive, some had to close, and several were still laying off employees to cut expenses. Experts also warn that if the U.S. increases rig count due to higher prices, another price collapse could result by the end of this year. OPEC also through curves in the market and many of us watched closely as the cartel reached deeper into propping up oil. Russia along with several other non-OPEC producers agreed to cut oil exports by 1.8 million barrels per day, which expires in March. Last November, the group agreed to extend the cuts until the end of 2018. Although, they all signaled a possible early exit from the deal if the market overheats. Recovering from the market downturn has brought advances in technology that will only improve as the industry rebounds. At OILMAN we’re excited to see machine learning, blockchain and IoT take a role in improving the health of the entire oil and gas sector, from engineering and services to exploration and production. We look forward to what the industry will bring us this year and we’re eager to report on key advances in the technology and software our industry relies on to thrive. Happy New Year from the OILMAN Team!MAGAZINEJANUARY — FEBRUARY 2018PUBLISHER Emmanuel SullivanMANAGING EDITOR Samuel CookFEATURE WRITER Eric Eissler Tim McNallyGRAPHIC DESIGNER Kim FischerCONTRIBUTORS Dan Briggs Steve Burnett Thomas Ciarlone, Jr. Phil Graves Joshua Robbins Story Sloane III Jason Spiess Mark StansberrySALES OilmanAdvertising.com Eric FreerTo subscribe to the print or digital edition of Oilman Magazine, please visit our website, www.oilmanmagazine.com/subscribe. The contents of this publication are copyright 2018 by Oilman Magazine, LLC, with all rights restricted. Any reproduction or use of content without written consent of Oilman Magazine, LLC is strictly prohibited.All information in this publication is gathered from sources considered to be reliable, but the accuracy of the information cannot be guaranteed. Oilman Magazine reserves the right to edit all contributed articles. Editorial content does not necessarily reflect the opinions of the publisher. Any advice given in editorial content or advertisements should be considered information only.CHANGE OF ADDRESS Please send address change to Oilman Magazine P.O. Box 771872 Houston, TX 77215 (800) 562-2340LETTER FROM THE PUBLISHERCONTRIBUTORS — BiographiesOilman Magazine / January-February 2018 / OilmanMagazine.com2Emmanuel Sullivan, Publisher, OILMAN Magazine

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Oilman Magazine / January-February 2018 / OilmanMagazine.com4For The Week Ending December 29, 2017DIGITAL DOWNHOLE DATAConnect with OILMAN anytime at OILMANMAGAZINE.com and on social media SOCIAL STREAMfacebook.com/OilmanMagazine RETWEETS@OilmanMagazine#OilmanNEWSStay updated between issues with weekly reports delivered online at OilmanMagazine.comCalifornia: 14Last month: 14Last year: 6 North Dakota: 46Last month: 46Last year: 33 Texas: 453Last month: 450Last year: 324 Louisiana: 62Last month: 63Last year: 48 Oklahoma: 120Last month: 122Last year: 86 U.S. Total: 929Last month: 923Last year: 658OIL RIG COUNTS*Source: Baker HughesBrent Crude: $64.61Last month: $63.56Last year: $53.93 WTI: $59.55Last month: $57.96Last year: $52.82CRUDE OIL PRICES*Source: U.S. Energy Information Association (EIA)Per BarrelCalifornia: 14,593,000Last month: 14,296,000Last year: 15,534,000 North Dakota: 36,082,000Last month: 32,417,000Last year: 32,114,000 Texas: 116,792,000Last month: 106,831,000Last year: 98,335,000Louisiana: 3,928,000Last month: 4,025,000Last year: 4,762,000 Oklahoma: 15,235,000Last month: 14,002,000Last year: 12,798,000 U.S. Total: 298,732,000Last month: 284,110,000Last year: 272,520,000CRUDE OIL PRODUCTION*Source: U.S. Energy Information Association (EIA) – October 2017 Barrels Per MonthCalifornia: 17,103Last month: 16,656Last year: 16,891 North Dakota: 63,783Last month: 57,936Last year: 53,311 Texas: 694,012Last month: 655,980Last year: 668,817Louisiana: 201,443Last month: 189,205Last year: 146,371 Oklahoma: 224,740Last month: 211,243Last year: 206,225 U.S. Total: 2,886,216Last month: 2,755,634Last year: 2,718,264NATURAL GASMARKETED PRODUCTION*Source: U.S. Energy Information Association (EIA) – October 2017 Million Cubic Feet Per Month

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Oilman Magazine / January-February 2018 / OilmanMagazine.com7OILMAN COLUMNAt the end of the year, I like to take stock—in summary form—of the leading decisions impacting the energy industry. Historically, this has been for my own personal reference, or something I share inside our rm with my partners. Since this crib sheet of sorts has been well received by my colleagues, I gured there might be broader interest in this annual “quick reference” guide. So, without further ado (and in no particular order), here is my short list of cases from 2017 that should be on your radar screen if you work in the oil and gas sector.• Denbury v. Texas Rice Land Partners (available here: https://tinyurl.com/den-burytexasrice). The Texas Supreme Court concluded that a pipeline can qualify as a common carrier for purposes of exercising eminent domain powers if it shows that it would serve the public interest by transport-ing gas “for one or more customers who will either retain ownership of their own gas or sell it to parties other than the carrier.” Notably, the Court emphasized that a pipeline company can make this evidentiary showing after condemning private land and after constructing a gas pipeline. In other words, the required showing of a public interest need not occur prior to the exercise of eminent domain powers. This was a big win for the industry.• Lightning Oil Co. v. Anadarko E&P Onshore, LLC (available here: https://tinyurl.com/lightningoil). According to this watershed decision from the highest Court in Texas, drilling through a mineral estate—which is not under lease by the driller—to access a reservoir beneath a bordering tract does not constitute a form of trespass. This settled a long-running debate about how traditional rules of trespass (originally formulated in the context of vertical wells) would apply to newer, directional drilling technologies.• Davis v. Mueller (available here: https://tinyurl.com/davismueller). In this closely watched case that threatened to invalidate mineral leaseholds across the state, the Texas Supreme Court addressed a challenge to a mineral conveyance, as ambiguous, because it had been made—lock, stock, and barrel—on a county-wide basis (in other words, the mineral deed provided for the transfer of all the seller’s oil-and-gas interests in a specic county). Mercifully, the Texas Supreme Court reached the correct decision, and came to the common-sense conclusion that county-wide mineral deeds are valid and enforceable. Leaving no room for doubt, Chief Justice Hecht wrote that, on its face, a county-wide conveyance “could not be clearer.” He then added, simply enough, that “all means all.”• Wenske v. Ealy (available here: https://tinyurl.com/wenskeealy). According to the dissent in this case that deeply divided the Texas Supreme Court, the ve-justice majority ignored both “[o]ur decisions that imbue words with ‘magic,’” and the fact that “drafters rely on that talismanic power to create certainty in their instruments.” In a nutshell, the majority concluded that the intent of the parties to mineral conveyances must be ascertained on a case-by-case basis, by parsing the instrument as a whole—without assigning undue importance to words and phrases of art. As a practical matter, wrote Justice Boyd on behalf of the dissent, the majority in Wenske jettisoned “long-standing rules in the oil and gas eld,” thus potentially “alter[ing] the ownership of minerals conveyed in deeds which rely on the law established by this court and followed by lower courts, commentators, and especially lawyers advising their clients.” • Samson Exploration LLC v. T.S. Reed Properties Inc. (available here: https://tinyurl.com/samsonreed). The Texas Supreme Court told a cautionary tale for operators with this unanimous opinion, which addressed the circumstance in which a well is situated within not just one pooled unit, but instead within two overlapping units. The operator, Samson Exploration, paid royalties from the well to interest owners from one of the units, to the exclusion of the other. The royalty owners from the second unit who had gone unpaid balked, arguing that—although Samson may have struck a poor bargain by including a single well in multiple units—a deal is a deal, and so a sophisticated actor like Samson must sleep in the bed it made. The Supreme Court of Texas agreed, invoking the language from a 1968 Fifth Circuit decision, Howell v. Union Producing Company: “To argue that we must enforce only reasonable contracts or contracts which reasonable men enter into, mistakes our function. We can and do enforce unreasonable contracts if they be clear. Unreasonable men make reasonable contracts and reasonable men may make unreasonable contracts.”• Hardin-Simmons University v. Hunt Cimarron LP (available here: https://tinyurl.com/hardinhunt). In this decision out of the Seventh Court of Appeals in Amarillo, several mineral lessors maintained that Hunt Cimarron had failed to execute a release setting forth the acreage and depths that were no longer held by an expired lease. The Seventh Court of Appeals sided with the mineral owners. While some operators casually treat acreage releases as housekeeping matters, this lackadaisical attitude can have serious consequences if the release obligation is not approached soberly. Indeed, mineral lessors may take the position that an operator’s failure to timely release acreage deprives it of the ability to enter into new, lucrative leases with other oil and gas companies. To inoculate against this kind of exposure, operators would be wise to give their full attention to lease provisions that require them to put acreage releases in place by a specic deadline.• Texas Outtters Limited v. Nicholson (available here: https://tinyurl.com/texasouttters). Here, the Court of Appeals in San Antonio decided one of the rst cases in some time to address the duties of the party with the executive right to lease minerals to non-executive mineral-interest owners. Texas Outtters, the surface owner and also the owner of the executive right, operated a hunting business on the subject property. To keep the surface estate pristine, Texas Outtters refused to exercise the executive right to lease, and, in response, the minerals owners sued for breach of duciary duty. The San Antonio Court of Appeals held that this claim was meritorious because, by declining to lease, Texas Outtters was angling to get for itself “unfettered use of the surface for its hunting operation,” and “the ability to sell its land at a large prot free of any oil and gas lease.”Tom is a litigation partner in the Houston ofce of Kane Russell Coleman Logan PC, where he serves as the head of the rm’s energy practice group. Tom is also the host of a weekly podcast on legal news and developments in the oil-and-gas industry, available at www.energylawroundup.com, and a video series on effective legal writing, available at www.theartofthebrief.com. Oil and Gas Law: 2017 Year in ReviewBy Thomas G. Ciarlone, Jr.Thomas G. Ciarlone, Jr.

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OILMAN COLUMNOilman Magazine / January-February 2018 / OilmanMagazine.com10Both the International Accounting Standards Board (IASB) and the Financial Standards Accounting Board (FASB) have recently issued new accounting standards related to lease assets. For public companies following FASB standards, the effective date for implementation is for the scal year beginning on or after December 15, 2018. For all other companies, the effective date of the FASB standard will be for the scal year beginning on or after December 15, 2019. The IFRS standards for all companies are required to be effective starting in January 1, 2019. For U.S. companies, a prior period comparison is required, although this is not a requirement for companies that follow IASB standards. There are certain exemptions that may preclude these assets from consolidating onto your balance sheet.These new accounting regulations will have a signicant impact on companies that are leasing or expect to lease their vehicle eet. While it seems there is plenty of time to implement this accounting change, the time to start preparing is now.The new standards change how lease assets are accounted for and presented on the balance sheet and should not impact the decision in the “lease vs. purchase” debate. Reason for the ChangeBoth the IASB and the FASB have stated that the intent behind these revisions was to improve the transparency related to lease assets. In a statement released by the IASB, it was estimated that the change in lease accounting standard would result in an increase of over $3.3 trillion in total assets on the related balance sheet for companies that follow either standard.While more astute investors have always adjusted the nancial statements when analyzing the impact of leased assets on a company’s nancial strength, these changes provide for more consistent comparisons across companies. As such, we do not expect the investor’s assessment of the company’s performance to change; this is especially true for investors in the xed rate market.Areas of FocusWhen the standard becomes effective, an asset called a “Right of Use Asset” will be calculated and recorded on the company’s balance sheet along with a liability referred to as “Lease Liability.” To simplify, the Right of Use Asset is the net present value of the remaining lease payments. In order to do the calculation, the company needs to make a number of assumptions and these will need to be disclosed in the nancial statement footnotes. The Lease Liability at inception will match the Right of Use Asset. Full service lease products will make the accounting more complicated due to the presence of the services component in the lease payment. New guidance will require that the two components in the full service lease payments are accounted for distinctly This accounting change may result in signicant investments of time and resources to ensure that companies are ready to implement the requirements under this standard. Since the implementation time frame is quickly approaching, especially for U.S. public companies, now is the time to start planning to ensure accounting compliance.During this process, it will be critical for eet managers to work closely with both their internal and external nance and accounting groups for guidance and interpretation to ensure a successful and timely implementation. Among the key things for your team to consider are:• Which standard applies to your company (IASB or FASB).• Which data points are required for the calculations under the applicable standard.• What is the information you currently possess.• What are the investments required to successfully implement the standard.Leasing – An Important AlternativeCompanies decide to lease for a number of different reasons, all of which remain viable under the new accounting standards. Given the right circumstances, leasing will allow a company to improve cash ow with the potential to reap additional benets. Leasing can allow companies to meet their eet needs with newer vehicles, which results in additional cost savings related to maintenance and fuel efciency. As an example, NJ Transit recently decided to begin leasing a percentage of its eet of over 1,000 vehicles, which consists of light duty trucks, cars, and specialty railroad equipment. Though public transit agencies traditionally purchase these vehicles and use them beyond their estimated life, NJ Transit was faced with a dire need to replace their aging and dilapidated assets. As this coincided with a period of reduced budgetary funding, they decided to pass on the traditional approach and decided to lease approximately 100 vehicles. Their decision was rewarded with a 10 percent reduction in maintenance costs year-over-year. Leasing, in all its forms, is expected to remain a viable nancing strategy with signicant benets for most companies. As the new standards take effect, proper reporting, compliance and other associated factors need to be considered in the decision making process.Paul Azores is Vice President of Finance at ARI in Mount Laurel, New Jersey, the world’s largest family-owned eet management company, managing nearly 1.5 million vehicles in North America, the UK and Europe. Visit www.arieet.com. New Accounting Standards May Bring Vehicles Leases on Your Balance SheetBy Paul AzoresPaul Azores

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Oilman Magazine / January-February 2018 / OilmanMagazine.com12OILMAN COLUMNIn 1992, I founded and chaired the rst International Energy Policy Conference (IEPC) now known as National Energy Talk (NET). IEPC/NET is now in its twenty-fth year. The theme then and now is “Striving for Energy Efciency and Environmental Preservation,” National Energy Talk provides a means of open dialogue regarding energy policies and issues.The November 18-19, 2017 issue of the Wall Street Journal had an editorial entitled, “Germany’s Green Energy Meltdown.” The editorial begins “American climate-change activists point to Europe, and especially Germany, as the paragon of green energy virtue…Berlin last month conceded it will miss its 2020 carbon emissions-reduction goal, having cut emissions by just under 30 percent compared with 1990 instead of the 40 percent that Mrs. Merkel promised.”The editorial went on to state, “Natural gas would be cleaner and is easy to switch on and off… natural gas accounts for only 9.4 percent of Germany’s electricity, down from a little over 14 percent in 2010. Gas accounts for some 30 percent of US electricity generation…”Natural gas, in my opinion, will be a strong force in lling global energy needs in the years to come for both power generation and transportation. Natural gas burns more cleanly than other fuels, can be piped into homes to provide heating, cooking, and run appliances, can be used as a fuel for vehicles, and is relatively abundant, and clean-burning. An article was written by Matt Ridley in 2013 entitled “How Fossil Fuels Have Greened the Planet”.The article stated, “Did you know that the Earth is getting greener, quite literally? Satellites are now conrming that the amount of green vegetation on the planet has been increasing for three decades. This will be new to those accustomed to alarming tales about deforestation, overdevelopment and ecosystem destruction.” The article stated, “The inescapable if unfashionable conclusion is that the human use of fossil fuels has been causing the greening of the planet in three separate ways: rst, by displacing rewood as a fuel; second by warming the climate; and by raising carbon dioxide levels, which raise plant growth rates.”Natural gas is leading the transition from being a net importer to a net exporter primarily due to the LNG efforts. Natural gas is an energy answer that is available today. We should denitely be putting it to use even more. For years, I have voiced my belief that natural gas reserves are critical to a strong US economy and extremely important to America’s energy security. Natural Gas: “abundant and clean” is important to our country’s energy sustainability. Energy is the future of America and America Needs America’s Energy!National Energy Talk is a platform engaging a national dialogue on energy issues, views and solutions. We address the needs, plans and issues that all types of energy face today. Through discussion, we can create a national energy vision. -- What do you think? It is time for National Energy Talk. www.nationalenergytalk.com Energy Efficiency and Environmental PreservationBy Mark A. StansberryMark A. Stansberry

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Oilman Magazine / January-February 2018 / OilmanMagazine.com13OILMAN COLUMNScientists and researchers are continually on the forefront of new drilling technology development, to allow companies to compete in a tighter prot-margin market. Some are new types of technology and others utilize existing technologies but employ a novel technique to their use. Below are some of the new technologies and techniques that are currently being used in the eld and some of which are in development. Zipper fracking The main goal of zipper fracking is to alter the stress eld in the rock at the vicinity of the next fracturing stage to be placed. By altering the stress eld, it allows for the creation of a more extensive fracture network. A fracture network is required for reservoir development. Two wells are drilled side by side at the same time and then a zipper fracture is carried out. It will save time by fracking well 1 in stage one and then fracture the rst stage of well 2. While stimulation takes place on the rst stage of well 2, there is simultaneous running of wireline to plug and perf stage 2 on well 1. Furthermore, another advantage is multiple wells can be drilled from the same pad which saves hundreds of thousands of dollars. The rig does not need to be disassembled, moved to another location and re-assembled. This drilling technique essentially doubles the production volume of a well. On the topic of zipper drilling, Dr. Mukul Sharma from the University of Texas at Austin said, “I think what people are nding is if you put wells closer and closer you tend to get reasonably good production from inll wells.” According to the school’s website, “Sharma’s group is also in the process of building a downhole tool that is specically designed for improving recovery in tight rocks. ‘This tool will be of great interest to a lot of operators in the Bakken and maybe the Eagle Ford - any oil reservoir that is tight is a perfect t,’ said Sharma.” Even with this new technique, a new type of tool is in development to facilitate and improve the process further. Ultra-Deep offshoreThe market and drillers continue to indicate that the days of easy oil are gone, and the focus has now shifted toward the exploration of ultra-deep offshore resources, which are found at depths of 1,500 meters and deeper. According to the U.S. Energy Information Administration in 2015, 9.3 million barrels of oil per day were extracted from deep and ultra-deep water. Drilling at such depths requires enhanced drilling tools to withstand the heat and the pressure. The two kinds of rigs that are required for this kind of drilling are semi-submersibles and drill ships, which work at or beyond 3,000 meters, respectively. At these depths, a oating rig is required, in order to reach the seaoor. Another important factor to consider is the pressure on the well casing at such a great depth. Wells must be constantly monitored to ensure their structural integrity. Well casing monitoring tools and systems Downhole tools and wireline services such as Weatherford’s Secureview: Casing and Cement Evaluation are new technologies that allow the operator to maintain constant monitoring on well casing integrity. Systems like these examine inner casing, outer casing, cement strength and bonds. Another way of monitoring well casing could be through the use of “smart cement” which is being engineered and developed by the University of Houston professor of civil and engineering, Cumaraswamy Vipulanandan. Mixing cement with Nano sensors would enable offshore operators to monitor the well casing without having to send down any tools at all. It’s sort of like your skin. When someone touches your skin, you can feel it. You can feel the pressure,” Dr. Vipulanandan said in an interview. Operators could easily call up the status of the cement structure with related software and look for areas of weakness and potential problems and x them before they happen. Electric impulse technology Currently in a research and development stage through cooperation between the Technical University Dresden in Germany and several industry players, electric impulse technology (EIT) is something straight out of a science ction book. The system is essentially two electrodes that are immersed in a conductive uid and placed up against the rock, emitting high-voltage impulses to impinge and pulverize it. The EIT system is delivered in much the same way a conventional drill is used and rigs do not require any modication or supplementary equipment to operate the EIT assembly. Laboratory tests have shown that the EIT can operate under pressure of up to 500 bar and can cut through rock at a rate between 0.5 and 1 m/h. Rates can be increased if there is a proper debris removal system in place. The system is designed to cut a borehole with a diameter of 12 ¼ inches under pressures up to 1000 bar and temperatures up to 200 Celsius. To its advantage, the lifetime of the system is 350 hours and therein lies the savings by reducing non-operational time between tool changes up to 7 times the normal drill bit. While this technology was originally intended for boreholes with geothermic properties, it can also be modied for use in hydrocarbon excavation. R&D continues to growResearch dollars continue to pour into labs and universities on the quest for better extraction technology in today’s low-price and hard-to-get oil. Many universities in Texas are pioneering the new technologies for the oil and gas industry. Investors and oil companies are doubling down to ensure they can get to the very last drop of oil. Drilling Technology Knows No BoundsBy Eric R. EisslerPhoto Credit: Kanok Sulaiman - www.123RF.com

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Oilman Magazine / January-February 2018 / OilmanMagazine.com15OILMAN COLUMNFrom production efciency to cost reduction, business challenges in the upstream are still driven by low oil prices. Sector leaders recognize the chance to improve operational efciency and increase production as a basis for future prosperity and they know that, in this tough energy economy, IT must drive business value through innovative technology solutions. That’s why they are investing in digital transformation to automate workows, ll functionality gaps and align processes.Take the case of Ballard Petroleum, a private exploration and production company headquartered in Billings, Montana, operating primarily in the Powder River and Williston basins in the Rocky Mountains with a daily oil production of 4,000 barrels across 112 wells.A production solution had been in place at Ballard since 2009, but when news broke that the product was on its way to being unsupported, Randy Zickuhr, Ballard’s IT and GIS Manager, and Mike Perius, Director of Engineering and Operations, decided to put all the company’s production systems and processes under a microscope. The business needed to get rid of organizational data silos, simplify the eld data capture and validation process, give the production engineers the ability to identify key trends and put accurate and timely data at top management’s ngertips. With those goals in mind, Zickuhr and Perius began the search for an integrated, end-to-end production solution that would create efciencies, saving monthly eld hours and ultimately reducing costs.Too much reliance on manual processesUnder its legacy systems, Ballard’s data lived in separate repositories and was being entered and re-entered several times. Pumpers had to capture production data in a very old-fashioned way—using pen and paper. Once daily routes were completed, they would then drive to a Ballard eld ofce and use a desktop computer to re-enter the information. Needless to say, this approach created several challenges and inefciencies.Unless they brought the physical production-history reports with them on their routes, pumpers had no way of knowing if production was trending down beyond the rate of natural decline. This resulted in situations needing immediate attention going unnoticed—and not being dealt with.Another problem was that data input into the production solution didn’t ow well into Ballard’s back-ofce systems, so information had to be keyed in multiple times by multiple people. “We had disparate systems and people were re-entering data several times. Sometimes the data didn’t match up from application to application,” Zickuhr says. Every time somebody touches data, you’re increasing the chances of introducing error to it. Reconciling the inconsistent data involved exporting lots of text les and trying to determine what was correct and what wasn’t—a rather time-consuming and unreliable process. As a result, some employees weren’t 100 percent condent with the data being used and management often did not receive information needed to make important business decisions in a timely fashion. Opportunities for creating efciencies were being missed. It was time for change.An integrated solution to put an end to siloesIn 2013 Ballard opted for P2 Production which has capabilities that would allow data to ow seamlessly from team to team for eld data capture and validation, production data management, hydrocarbon allocation and production optimization needs.The eld data capture tool is used to quickly and efciently collect and validate data at the well sites. This was a game changer for the pumpers as they no longer needed to collect the data, go back to the ofce and re-enter it into another system. They could now input the data while they were in the eld and be done at the end of the day. The technology, which is very easy to use, also integrates Ballard’s manually captured data with the data from its SCADA systems, giving everyone a complete picture of the company’s operations. When you have a ton of data, having the tools to make sense of all of it and track what’s taking place is crucial. The software’s reporting and analytics tool is used to analyze trends and get production-robbing issues resolved quickly. There were several blind spots before the adoption of the new solution whereas now Ballard can recognize when there is a dip in production and what the cause is which makes it easier to diagnose production problems. Critical data about Ballard’s assets is presented in a very intuitive format enabling access to the details that help make better decisions. From the eld, the data ows seamlessly into the production data management system within the solution to be allocated and stored. From there, the data is channeled directly into Ballard’s accounting system for revenue purposes. All the silos are brought together into a single place. The most critical feature of the new system is that it connects the eld to top management who can now see daily volumes and consolidat-ed volumes. Management is also reassured by the fact that their teams are tracking production properly, which makes them condent their de-cisions are based on accurate data and therefore most likely to be right. In fact, everyone across the company is now condent in the accuracy of their individual work. That’s because they all trust the numbers coming out of the eld and the “downstream” processes being used. “In my estimation, the pumpers are the keepers of the cash. If they don’t get it right in the eld, we can’t deliver accurate numbers to management, which means they can’t forecast and plan with condence,” Perius says. When everything is done right in the eld, everything else that follows is also done right.Measurable, transparent resultsThe new solution brought Ballard many tangible benets. Pumpers now spend more time on resolving rather than hunting for problems. In fact, 300 hours are saved every month on eld activities. This helps them nd more time to focus on meeting production targets. Downtime reduction is a second important benet. Pumpers can now analyze current and historical production numbers side-by-side and, if something is amiss, they’re able to resolve the issue quickly and return the asset to peak performance.Last but not least, the data is now overall more accurate and of higher quality thanks to the pumpers catching most of their own errors. In today’s upstream sector, it’s all about volumes. Companies need to match down to the dollar what they sell with what they produce. By leveraging digital oileld technologies, IT can support the move to operational intelligence. Ballard’s story teaches us that better, more evolved technologies and consistent data can provide the insights you need to ride out low prices and emerge stronger.Clara Fuge is vice president of product management at P2 Energy Solutions. From Siloed Data to Integrated Capabilities By Clara Fuge

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Oilman Magazine / January-February 2018 / OilmanMagazine.com16PRODUCT SHOWCASEFOX Thermal Instruments has launched a newproduct - the Model FT4X Thermal Mass FlowMeter - ideal for serving Oil & Gas and Industrialapplications.The new FOX Model FT4X allows the user to entera Custom Gas Composition to optimize the owmeters calibration and calculate Density and GrossHeating Value.The FT4X is a high-end ow meter, and it features a robust design. The notable newfeature of the Model FT4X is theData Logger. The FT4X DataLogger records ow rate, totals, andother events and alarms. The advancedfeatures of the Model FT4X DataLogger include:• 40 daily totals• Settable Contract Time denesContract Day• Time/date stamped alarm & event logs; 7 year history• Power off totalizer; power failure creates event log entry• View Density and Gross Heating Value of selected gasThe logs in the Model FT4X also display informationabout the meter’s setting and functionality:• Gas or gas mix composition• Flowmeter’s conguration settings• Calibration Validation historical test data• Logs of events and alarmsThe FT4X has a long list of other advanced features:• 2nd generation non- cantilevered DDC-Sensor™ - Advanced Direct Digitally Controlled sensor• Expanded Gas-SelectX® Menus – 3 onboard gas selection menus• CAL-V™ - In-situ Calibration Validation• RS485 Modbus RTU or HART - Communications options• Standard USB Port – Connect a PC• FT4X View™ - Software for conguring, graphing, and logsThe 2nd generation DDC-Sensor™ eliminates thesensor element vibration which can lead to metalfatigue and failure. Its unique design provides atechnology platform for calculating accurate gascorrelations for the Gas-SelectX® feature.The FT4X was designed to be used in Oil & Gasand Industrial applications. It is ideal for monitoringpure gases or even complex are gas compositions.Gas-SelectX® provides an expanded selection ofgases from 3 menus:• Pure Gas Menu (11 common gases)• Mixed Gas Menu (11 common gases - mix in 0.1% increments)• O&G Gas Menu (C1 – C9+, Nitrogen, and CO2 gases - mix in 0.1% increments)The FT4X’s CAL-V™ feature allows users toconrm that the meter is functioning properly andaccurately -- with just a simple push of a button.FT4X View™ software allows easy adjustmentsto the meter conguration, evaluation of alarmconditions, collection of process data, andmeasurement viewing from your PC or controlstation. Moreover, this software can be used toinitiate CAL-V™ -- and it automatically logs theresults of each CAL-V™ test. If any regulatorysubmission is required, the software will generatea certicate for easy recordkeeping.Greg Smith, Sales Support & Customer Service ManagerFOX Thermal Instruments, Inc.399 Reservation Road, Marina, CA 93933(831) 384-4300 | www.foxthermalinstruments.comFox Thermal Instruments

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Oilman Magazine / January-February 2018 / OilmanMagazine.com171 Utica and ___6 Happens every April/ May____8 Holiday drink9 _____Information Administration10 Inert gas symbol11 Lady referred to13 Appropriate15 Win17 Mark on the skin18 Spanish article21 Binary number22 Possess24 Sailor, abbr.26 Rubberneck27 Subsea _____30 ____Q excellence, core value for the oil industry32 American ____ Institute36 Governing body38 Where deals happen ___39 Geographic referenced area in OklahomaDown1 Operation & Maintenance____2 Mineral ____3 Texas Alliance of ___ Producers4 Stretch out5 Indication6 Above7 Headquartered in San Ramon, CA12 Andarko Basin in Oklahoma also known as ___ play14 Pea’s place16 Short for Internet of Things19 Louisiana O&G Association ___20 Crane operator’s areaAcross23 Lived25 Oil ___ (OPEC member perhaps)28 Dangerous weather condition for the roads29 Retains31 Get really wet32 Camera sweep33 Over the ___34 CEO’s deg., perhaps35 Strange37 Southern California county, for shortCustomGas MixEthaneCarbonDioxideMethaneHexanesHydrogen ArgonButanePentanesPropaneHeptanesNonanes+OctanesNitrogenSet and Log a Custom Gas Mix!FT4X Advanced Features:• Robust 2nd Generation DDC-Sensor™• Data Logger with date/time stamp & 40 24-hour dailytotals• Gas-SelectX® Gas Selection Menu• Density and Gross Heating Value of Gases• CAL-V™ Calibration Validation• Up to 1000:1 Turndown• FM/FMc, ATEX, IECEx, and CE Approvals• Optional RS485 Modbus RTU• Free FT4X View™ Software Fox’s Model FT4X Data Logger records 40 24-hour daily totals, logs events and alarms with a 7 year history, has settable Contract Time to define the contract day, and has a power off totalizer. The FT4X also has the2nd Generation DDC-Sensor™ and advanced correlation algorithms to provide accurate, multi-gas-capable gasflow measurement. Direct mass flow measurement, exceptional low-flow sensitivity, fast response, and lowmaintenance requirements also distinguish the Fox Model FT4X.TRY THEFOX ONLINECONFIGURATORTOOLEmail at sales@foxthermalinstruments.com, call us at (831)384-4300, or visit us online to find out how we can help you meetyour gas measurement and process efficiency needs. Use the onlineproduct configurator to customize a meter for your application!w w w. Fo xTh e r m a lIn s T r u m e n T s.c o mThe FT4X Gas-SelectX® allows the user to choose pure gases or a custom gasmix with the gases available in the Oil & Gas and Mixed Gas Menus. Set the gascomposition in 0.1% increments in the field and the meter’s Flow Calibration,Density, and Gross Heating Value are automatically adjusted for the entered mix.The new Data Logger will store the gas composition and other configuration data.Model FT4X Flow MeterOILMAN CROSSWORD PUZZLE - ANSWERS
Oilman Magazine / January-February 2018 / OilmanMagazine.com171 Utica and ___6 Happens every April/ May____8 Holiday drink9 _____Information Administration10 Inert gas symbol11 Lady referred to13 Appropriate15 Win17 Mark on the skin18 Spanish article21 Binary number22 Possess24 Sailor, abbr.26 Rubberneck27 Subsea _____30 ____Q excellence, core value for the oil industry32 American ____ Institute36 Governing body38 Where deals happen ___39 Geographic referenced area in OklahomaDown1 Operation & Maintenance____2 Mineral ____3 Texas Alliance of ___ Producers4 Stretch out5 Indication6 Above7 Headquartered in San Ramon, CA12 Andarko Basin in Oklahoma also known as ___ play14 Pea’s place16 Short for Internet of Things19 Louisiana O&G Association ___20 Crane operator’s areaAcross23 Lived25 Oil ___ (OPEC member perhaps)28 Dangerous weather condition for the roads29 Retains31 Get really wet32 Camera sweep33 Over the ___34 CEO’s deg., perhaps35 Strange37 Southern California county, for shortCustomGas MixEthaneCarbonDioxideMethaneHexanesHydrogen ArgonButanePentanesPropaneHeptanesNonanes+OctanesNitrogenSet and Log a Custom Gas Mix!FT4X Advanced Features:• Robust 2nd Generation DDC-Sensor™• Data Logger with date/time stamp & 40 24-hour dailytotals• Gas-SelectX® Gas Selection Menu• Density and Gross Heating Value of Gases• CAL-V™ Calibration Validation• Up to 1000:1 Turndown• FM/FMc, ATEX, IECEx, and CE Approvals• Optional RS485 Modbus RTU• Free FT4X View™ Software Fox’s Model FT4X Data Logger records 40 24-hour daily totals, logs events and alarms with a 7 year history, has settable Contract Time to define the contract day, and has a power off totalizer. The FT4X also has the2nd Generation DDC-Sensor™ and advanced correlation algorithms to provide accurate, multi-gas-capable gasflow measurement. Direct mass flow measurement, exceptional low-flow sensitivity, fast response, and lowmaintenance requirements also distinguish the Fox Model FT4X.TRY THEFOX ONLINECONFIGURATORTOOLEmail at sales@foxthermalinstruments.com, call us at (831)384-4300, or visit us online to find out how we can help you meetyour gas measurement and process efficiency needs. Use the onlineproduct configurator to customize a meter for your application!w w w. Fo xTh e r m a lIn s T r u m e n T s.c o mThe FT4X Gas-SelectX® allows the user to choose pure gases or a custom gasmix with the gases available in the Oil & Gas and Mixed Gas Menus. Set the gascomposition in 0.1% increments in the field and the meter’s Flow Calibration,Density, and Gross Heating Value are automatically adjusted for the entered mix.The new Data Logger will store the gas composition and other configuration data.Model FT4X Flow MeterOILMAN CROSSWORD PUZZLE - ANSWERS

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Oilman Magazine / January-February 2018 / OilmanMagazine.com18OILMAN COLUMNInternational market experts, analysts, consultant agencies and specialists in the oil and gas sector see more growth in the Asian LNG market instead of Europe, especially from non-OECD countries.Analysts believe that several factors will come into play to make Asian a strong trading market in 2018. The easing crude prices due to constant increasing U.S. production, OPEC’s decision to cut production, China’s policy to reduce imports of petroleum products since 2014, and the Russian strategy to acquire oil assets in other countries could put Asia in a leading position in oil and gas business over Europe.Analysts are of the view that all of the above factors created sufcient opportunity for surplus crude oil and natural gas in the global market. The stated factors have changed the global LNG trade and as a result, global LNG in 2016 witnessed rising LNG demand offsetting growth in supplies.As China has again decided to import petroleum products, LNG importers especially from the South Asia region are in focus for traditional exporters (Middle Eastern nations) and new exporters like the United States and Australia. Market experts say the industry (LNG) is expected to remain oversupplied and a buyer’s market will prevail through 2020.During the last few years, South Asia region has emerged as a hotspot for the LNG business, with Pakistan and Bangladesh set to join India as major consumers. More importantly, global oversupply and low LNG prices are set to continue helping the region resolve their decades-long energy crisis.Figures suggest that only India and Pakistan in the South Asia region currently import LNG, taking in a combined 25 million tonnes, or 8 percent of global demand last year.It is equally important to note that since the past about 20 years or so, China has been the main driver of global oil demand growth. With current trends of LNG trade, it is believed that China is expected to become the leading determinant in global natural gas demand in the next 20 to 30 years.The International Energy Agency (IEA) estimates that roughly 90 percent of global LNG demand growth will come from emerging and frontier economies by 2022. IEA sees global gas demand growing 1.6 percent annually until 2022, with China making up 40 percent of this growth.Earlier last month, Mr. Neil Beveridge, an analyst from Sanford C. Bernstein & Co. has estimated in a research note that China’s gas consumption is expected to rise to 300 billion cubic meters (bcm) in 2020 from 206 BCM in 2016, and surge to 600 bcm by 2040.Kerry-Anne Shanks, Head of Asia gas and LNG, Wood Mackenzie, said that demand for LNG in China is growing. Shanks estimates that demand could reach 330 bcm by 2020, up from 206 bcm in 2016.The future of LNG trade on the Asian continent seems bright as the Chinese Government aims to increase the role of natural gas within the country’s energy mix from 6 percent in 2016 to 8-10 percent by 2020. Some other South Asian nations, such as India, Pakistan, and Bangladesh have also decided to increase the use of gas in their countries from the current levels.Realizing the potential in China’s gas market, U.S. President Donald Trump has visited Beijing earlier this month with a large business delegation in tow, including a sizeable contingent from the energy sector.Another Asian giant, India, has also emerged as the demand center for petroleum products, especially for the natural gas.Global oil major Royal Dutch Shell expects that India may see at least six times growth in its gas market by 2030 from the current levels. Shell further adds that liqueed natural gas (LNG) may be the largest contributor to this growth in the gas market.The latest prediction by Royal Dutch Shell comes at a time when India is already trying to increase the share of gas in the overall energy mix to over 15 percent by 2030.Interestingly, Shell’s prediction regarding the rising trend in India’s gas market is not the very rst. Before this prediction some other oil giants have also expressed similar views about the Indian gas market.South Asia Region BecomesGlobal LNG HotspotBy Tara MalhotraPhoto Credit: Evgeny Gromov - www.123RF.com

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Oilman Magazine / January-February 2018 / OilmanMagazine.com19OILMAN COLUMNJosh Robbins3 Ways To Sell Your Oil & Gas Assets QuicklyBy Josh RobbinsIt’s a new year, and the oil and gas market is hungry for assets. There are companies all over the map looking for good quality assets, but the transactions are not happening. We have noticed a considerable amount of deal ow in the past few months, as seller’s have seen this period as a market shift in their favor. So, with a number of deals available, willing sellers, and active buyers, why are there not more transactions?Beachwood has seen a number of transactions in 2017, and it’s because we’ve seen companies that are looking to sell follow a few crucial steps.#1 Don’t put your deal to auctionIf you are a buyer in this market, you are running the exact same economic model as every other company in the auction. So, if you are a seller, you can expect 30 or so bids on your assets that are only a few dollars from one another. More than likely it is based on PV10 (or close) and offers no value on the upside you see for your asset. This should be a last resort for operators and owners that are looking to get PV10 on assets with positive cash ow, and slightly higher than zero for assets in the red.#2 Make sure you give dataCompanies that are looking to buy your assets want to know what you know. If you know that production is down because of a land issue or a new pumper, that information is very valuable to a buyer. Big data is everywhere. Most of your production, decline curves, reservoir information and estimated expenses are available or easily accessible. The upside storyline of each asset is what will bring additional value to your sell price. Buyers want to know as much information as possible. Don’t view this as a waste of time, understand that this data will (in many cases) increase the chances of closing quickly. #3 Know the market valueWith that being said, you as a seller need to know the market value. We all want to live in 2013. It was fun. But the reality is that asset is worth half of what it was in 2013, and the decline curve has continued to move 5 years down the line. Knowing the estimated value of your assets gives you great leverage toward a quick close. As I say in every article I publish, every deal is different. Our strategy is generalized and can be used as discussion points for your A&D team, or your contract divestiture organization. The team at Beachwood is always available to discuss your company specic questions, just give us a call: (405) 463-3214. OILMAN COLUMNLast June, BP Plc outlined in its 2017 Energy Outlook that global consumption of energy is expected to increase by 30 percent through 2035, driven primarily by growth in emerging economies, especially China and India.Platts also sees growth in Indian gas consumption, but maintains that Indian LNG imports should rise by 10 percent annually over the next few years, surpassing 30 million mt/year by 2020, versus 19 million mt/year in 2016.Knowing the importance of natural gas and low prices due to oversupply, India also announced its intentions to soon build a natural gas trading platform. Such an action could lead to market-determined pricing of gas for domestic and imported supplies.The introduction of a natural gas trading platform was recently announced by India’s Oil Minister Dharmendra Pradhan, at India Energy Forum by CERAWeek, organized in New Delhi from October 8-10, 2017.Today, the world average for gas consumption is 24 percent, while in India it is 6-7 percent. However, gas demand in both of the largest Asian countries (China and India) has potential for much higher growth.Having a population of over 1.3 billion people with more than 82 percent of its crude imported, India’s natural gas consumption may see new records in the next few years. Global gas exporting nations like, U.S., Australia and Middle Eastern are not in a position to ignore this potential buyer.Since domestic gas production is limited, India is already the world’s fourth-largest importer of LNG, behind Japan, South Korea, and China. But trends suggest that demand for imported LNG would surge threefold in the coming years.Due to the global LNG oversupply, Wood Mackenzie forecasts Asia spot LNG prices to drop to below $5/mmbtu by 2019 and remain in that range till 2022. Wood Mackenzie feels that this will be an attractive price range for Indian LNG buyers.Other energy hungry nations in the South Asia region are Pakistan and Bangladesh. Platts published some analysis on these countries.According to gures provided by Platts, Pakistan’s current gas consumption oscillates between 6.2 Bcf/d in the summer season and 6.8 Bcf/d in winter.Zeeshan Afzal, head of research with Kara-chi-based Insight Securities, was quoted by Platts as saying that LNG was initially seen as a short-term solution, but it looks like Pakistan would keep importing 3-4 Bcf/d or more in the long term, given rising domestic demand and difculties to start exploration activities in the more unstable areas.Reports also suggest that Bangladesh’s imports of LNG are expected to reach 5 million tonnes in 2020.

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2018 Oil & Gas Market Outlook By Samuel CookFEATUREOilman Magazine / January-February 2018 / OilmanMagazine.com20Few industries are as accustomed to change as oil and gas. From the rapid emergence of new technologies to dramatic ups and downs in the market, the uid nature of the industry always offers up good discussion material as the year comes to a close. Each year is also tug of war between both good and bad that develops for the industry. 2017 was a good example of that.According to data from the World Bank, crude oil prices in 2017 hovered between $50 - $55 a barrel for most of the year. While prices are at near-historic lows, they’ve also been extremely stable. The steady development and expansion of American shale continues to provide needed predictability to the international market. This is a welcome change, especially in the wake of the precipitous price drops that occurred in 2008-2009, and later in 2014-2015, that saw crude oil lose 60 percent of its value in less than a decade.Despite a bit of investor angst at low per-barrel oil prices, companies have proven surprisingly innovative at surviving and thriving under current market conditions. All signs point to the 2017 market as a good marker for this year, overall.Meanwhile, nature continues to be an unpredictable and devastating force. Many in Houston are still striving toward recovery after the destruction wrought by Hurricane Harvey. After several quiet years without any major hurricanes making landfall in the continental U.S., nature decided to wreak havoc on the lives and livelihoods of people across the Gulf and in the Caribbean. In an August 31 article, Bloomberg noted that when Katrina hit in 2005, the U.S. was exporting 800,000 barrels of rened oil products. Over a decade later, the international markets felt a ripple effect after Harvey due to the large increase in American oil exports—now 6 million barrels per day of crude oil and rened products. If the impact of Harvey brought anything to light this year, it was the increasing importance of American oil on the international market. And as much damage as Harvey left behind, it also helped highlight the growing importance of oil on the American and world economies.With that in mind, looking toward 2018 is a distinct reection on what 2017 brought us. As the United States quickly steps into the role as a key oil exporter instead of a net importer, the 2018 market outlook looks favorably on the growth prospects in the oil and gas sector.2018 Oil and Gas Market OutlookIn his 2017 Outlook on Oil and Gas, Deloitte Vice Chairman John England stated that 2017’s market would be seen as the “slow road back.” His prediction was spot on in many ways. As England pointed out, the oil market reached near-historic lows the years prior. However, in 2016, U.S. oil companies learned to more effectively tighten their belts. 2017’s stable, yet higher oil prices marked the steady demand for American oil, alongside the growing importance of liqueed natural gas.As 2017 comes to a close, the market prospects for 2018 look increasingly bright. America is now exporting more oil than ever, including new and increasing shipments to growth markets like India. With a better understanding of how to stay protable even at lower per-barrel oil prices, investors may be eyeing oil and gas as a potentially lucrative venture in 2018.Industry Leader Perspective:Sid Miramontes, President of Miramontes Capital:On December 13, a bipartisan agreement was set to lower the corporate tax rate to 21 percent beginning in 2018. This dramatic reduction Photo Credit: bizoon - www.123RF.com

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FEATUREPhoto Credit: bizoon - www.123RF.comis intended to benet industry workers and investors while making the oil and gas industry more competitive in global markets.President Trump has historically shared fossil-fuel friendly views and the plan which the House passed initially on December 19 expands the ability of businesses from shale drillers to solar panel manufacturers to write off equipment expenses. This continuation of tax incentives preserves investment in the energy sector as a whole, including renewable energy.The primary objective is to simplify the tax code by getting rid of most deductions. Through decades of legislature intended to reward individual and corporate investment, the tax code has become a complicated web of loopholes and exemptions navigated through complex nancial maneuvering. So far, the tax plans preserve the use of last-in-rst-out (LIFO) accounting rules. This allows crude stockpiles to be valued at current market prices rather than original purchase costs. Also preserved are intangible drilling costs deductions and a taxable income reduction to reect the depreciation of reserves.While the details of the legislation are by no means secure, the intended net effect will hopefully translate to nancial benet to hardworking Americans, more jobs and a strong, independent economy in 2018. Miramontes Capital provides concierge advisory services and nancial guidance to individuals making the transition into retirement. Clients receive personalized investment strategy taking into account each client’s unique values and objectives.Sid has been featured in Forbes Magazine, which included him as a California Financial Leader, and named three times to Barron’s Top Financial Advisors.Exploration and ProductionThe U.S. Energy Information Administration regularly publishes updates on the changes in the U.S. oil and gas industry. In comparing December 2016 to December 2017, key changes in exploration and production have emerged. The Permian and Bakken regions continue to see steady growth in new wells and increasing production numbers. New wells and large gas outputs are also popping up in the Appalachian oil elds, such as the Marcellus and Utica shale plays.Meanwhile, legacy oil and gas wells continued to the decline in production rst seen in 2014. Interestingly, new oil well production in several key regions was weak overall in 2017, despite a sharp rise in the well count. New gas well production also attened or fell in some key regions as well, even as gas rig counts grew in many places.For new oil rigs, the Bakken, Niobrara and Eagle Ford regions proved the strongest, posting gains by December that continued strong growth from 2016. On the new gas rig front, Haynesville and Appalachia proved to be extremely valuable to U.S. production numbers. Additionally, as legacy oil and gas wells saw notable decreases in production output, Eagle Ford and Haynesville continued to show stable output and even growth by the end of the year.While 2018 will likely see more rigs added across oil and gas, a year-over-year doubling of numbers may not be as likely. Legacy wells may continue to fall in production output in most regions as well as companies pour more resources into new, more technologically advanced and efcient rigs.Natural gas, in particular, is set to be a leader in the coming year and beyond. As Mark A. Stansberry states in his OILMAN Magazine article this month, “Natural gas...will be a strong force in lling global energy needs in the years to come for both power generation and transportation.” The signs of a strong natural gas market are with us now. According to EIA data, the supply of natural gas rose year-over-year from 2016 to 2017. Natural gas production rose by about 1 billion cubic feet per day for both Marketed Production and Dry Gas Production, respectively. EIA projections suggest both types of natural gas production will rise by about 6 billion cubic feet per day in 2018.Technology in Oil and GasWe’ve seen a lot of technological changes come to the oil industry just in the past ten years. As companies have been forced to tighten their belts as a result of lower per-barrel oil prices, new drilling and production methods emerged to help reduce costs. Drilling innovations in shale, in particular, have happened at a furious pace as companies learn to produce more with fewer resources—human resources included.Still, the future of oil and gas extends beyond just physical tech, but digital trends. Big data is already starting to take over the industry, as more and more companies realize the way in which data collection, analysis and application can bring unprecedented clarity to almost every aspect of the industry. From exploration to downstream operations, every part of the industry can be upended in unique ways with the knowledge imparted by big data. Combined with the innovative connections between big data and the “Internet of Things” or IoT, connecting all of those massive data points together through actionable devices and services.A June 2017 article from CIO, titled “How big data is disrupting the oil and gas industry,” highlights exactly what everyone in the industry has been thinking for some time. “Big data is changing everything. The oil and gas industry is nally catching up,” they write. Indeed, it is. Oil and gas is often slow to adopt new technology, preferring often to wait until something has been thoroughly proven before investing. And in today’s market, investment dollars are often far tighter than in the past, making any new venture worth vetting rst.Still, big data stands to change everything. From helping to decrease accidents in the eld to improving yields and increasing revenues, the more data companies collect and analyze using new analysis tools, the better. 2018 is likely to be a noticeable break-out year for oil and gas and its burgeoning love affair with 21st-century tech. Industry Leader Perspective:David Bateman, Co-CEO of SitePro®:“[The Internet of Things] in the oil and gas business is revolutionizing the way things are done from a eld operations and production perspective. It is driving efciency and reducing costs from non-value added activities by giving users information to make better decisions in real time.”Magne Halvorsen, Global Industry Director for Oil & Gas at IFS:With governments around the world increasingly focused on restricting pollution, 2018 will see a continued rise in demand for ways to minimize CO2 and NOx emissions as well as to accurately document them for compliance purposes. Thus, we are likely to see a move away from diesel-powered plants to the use of alternative energy sources, such as tidal, to reduce emissions. With each rig producing as much CO2 annually as 5,000 cars, there is a heavy price to pay - nancially and environmentally. Advanced compliance and risk solutions will become an essential requirement to automate the monitoring and reporting of emissions, replacing inefcient manual processes. While remote facilities have historically been difcult to connect to the internet, satellite communications are enabling a new wave of cloud-powered systems to support these efforts.IFS develops and delivers enterprise software for customers around the world who manufacture and distribute goods, maintain assets, and manage service-focused operations.2018 and BeyondThere’s far more anticipated in 2018 than covered here, of course. With oil hitting a 2 ½ year high of $60/barrel .just as 2017 closed out, the prospect of a newly energized oil market are strong. Additionally, the opening of ANWAR (an historic provision couched into the tax overhaul) offers interesting prospects for well beyond 2018. Oilman Magazine / January-February 2018 / OilmanMagazine.com21

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Oilman Magazine / January-February 2018 / OilmanMagazine.com22OILMAN COLUMNThe complex legal nature of negotiating a mineral rights lease agreement can be intimidating to the landowner as well as smaller oil and gas companies who perhaps cannot afford the legal cavalry necessary to hash out a benecial deal. Misunderstanding the terms of a deal, or failing to research the rules and laws that apply to each situation, can lead to an unsatisfactory outcome and a substantial loss in earnings potential.A misunderstanding of the certain rights which accompany the ownership of land or minerals is one particular point of perplexity which can lead to an unfortunate outcome if carelessly navigated. As the Louisiana Oil and Gas Association (LOGA) notes, “Owning land does not automatically mean you own the mineral rights to a property. If your current deed does not specically discuss minerals, you may need to contact a professional in title research.”Each state also has its own unique laws and rules which can further complicate matters. For instance, “In Louisiana, mineral rights can only be reserved (held by the seller of surface property) for ten years, either from the date of sale or from the date of the last exploration activity or production of minerals from the land. If there is no mineral development on the property in that time period, the mineral rights then automatically transfer to the buyer.”Mineral rights are certainly not to be confused with surface rights, which deal with the usage and ownership of land above ground. Conicts arising between the varying interests of mineral and surface rights owners have produced a number of legal cases which have yielded important precedents regarding the issue. A paper titled Minerals, Surface Rights, and Royalty Payments from the Texas A&M University (TAMU) Real Estate Center examined some of the more inuential cases which set long-standing precedents for mineral and surface rights. As the paper notes, “One of the earliest and most signicant cases decided by the Texas Supreme Court held that the mineral estate is dominant over the surface estate. The grant of the mineral lease gives the mineral lessee the implied right to use as much of the surface as is reasonably necessary for the exploration and development of the minerals.”Furthermore, when the lessee is deciding how much or what region of surface land needs to be used for exploration purposes, “The surface owner’s consent is not required for this right to be exercised. The mineral lessee is liable for surface damages only in limited situations.” In other words, mineral rights will always trump surface rights in most situations, giving a considerable advantage to the holder of the mineral rights. It is imperative that both the seller and buyer in a mineral rights agreement understand the terms of their specic agreement and how it relates to the state and national laws which apply to general mineral rights agreements. Another important precedent established by Texas courts posited the idea that an oil and gas lease gives the mineral lessee the exclusive right to initiate and complete various tests to ascertain the location of oil and gas on the premises. However, “Because an oil and gas lease is silent concerning how, when, and under what circumstances the tests may be undertaken, the mineral owner may wish to address these issues when negotiating an oil and gas lease.”These issues should be addressed when a company initially approaches a mineral owner with a desire to conduct exploratory tests for minerals. The mineral owner has considerable power at the beginning of the negotiation process, and, based on the terms set forth in a lease or purchase agreement, can decide whether or not to give access to companies for the purpose of exploring the property for mineral resources. “Permission from the mineral owner may be granted in one of two forms. The oil company may acquire an oil and gas lease that, among other things, grants to the lessee the exclusive right to explore. Or, the oil company may acquire permission only to conduct geophysical tests. If the tests prove positive, an oil and gas lease may be sought,” the TAMU paper notes. Another front which warrants discussion is the differences between leasing and selling one’s mineral rights. Mineral Rights Coach notes that there is a very important distinction between selling and leasing one’s mineral rights. Selling offers the option to receive a large upfront payment regardless of whether any valuable minerals are discovered or not. However, this decision could mean sacricing the option to yield a consistent income from future royalty or lease payments, which might eventually surpass the amount of initial funds received from an upfront sale. On the other hand, choosing to agree to a deal with royalty payments also has its own risks, as there is no guarantee that oil and gas will be discovered within the region concerned in the mineral lease agreement. Of course, no one can be sure if there are minerals sitting beneath the surface before tests are conducted, so an individual must base this decision on their unique situation and needs. A company should also consider these factors, as offering to pay a lump sum up front does not guarantee any sort of return on investment if the land does not produce any valuable minerals. However, it should be kept in mind that if minerals are found, the royalty check that will be going to the mineral owner will consistently be taking a cut out of the potential prots that could be derived from the drilling operations. Navigating the terrain of a mineral rights lease or purchase agreement can be overwhelming to companies or individuals who may lack the necessary experience to determine what is considered a fair deal. The costs incurred upfront in order to avoid a future legal issue may seem burdensome at rst. However, seeking out the proper legal representation can prevent signicant nancial headaches in the future, and it will usually prove to be well worth the cost if a reliable, trustworthy legal resource is found. Navigating Mineral Rights? Don’t Be Scared by the ComplexityBy Tim McNallyPhoto Credit: bacho12345 - www.123RF.com

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Oilman Magazine / January-February 2018 / OilmanMagazine.com23OILMAN COLUMNLeading oil and gas companies haven’t exactly been quick to bring their maintenance systems up to date. And with that comes huge risks to the environment, workers, and an organization’s nancial state. The 2010 Deepwater Horizon oil spill, for example, killed 11 platform workers and was named ‘the worst U.S. environmental disaster.’ But even if organizations do sidestep calamity, outages and system failures can cause the worst performers to lose out on $88 million annually, according to GE company Baker Hughes. That’s all while having to deal with complex equipment infrastructure, difculty in accessing reserves, and swinging oil prices. Fortunately, anomaly detection for predictive maintenance technology is gaining steam. The sensor technology—paired with Articial Intelligence (AI) and machine learning—has made offshore rigs much easier to monitor. It can predict downtime even before it occurs. Yes, just like foreseeing the future. Here’s why oil and gas companies should invest in predictive maintenance The AI industry is advancing—and fastThere’s no doubt that computers are smarter than ever before. But did you know that computers can ‘learn’ without being given any instruction? In what’s called reinforcement learning, machines can associate an outcome with the steps that lead up to it, and know whether the result will be positive or negative. Simply put, the AI industry is advancing beyond belief.Undoubtedly, these advancements in machine learning will push forward the predictive maintenance market, which is already expected to be worth $4.9 billion by 2021. So, while many companies might feel AI is too big of an investment at this stage in the game—especially since for the past three years, oil and gas prices haven’t exactly been stable—it’s actually quite the opposite. With more than 1,700 renery shut downs between 2009-2012 (1.16 a day), not leveraging the right technology now puts oil and gas players at a disadvantage now, but also down the road. It’s not like companies haven’t tried to implement predictive maintenance. But while data is being collected from large pipelines or gas-gathering platforms, the insights aren’t being used for good. Oftentimes, the data is siloed into legacy systems which are difcult for computers to process. Despite many companies’ efforts to leverage sensor technology, many times this powerful data is going to waste. On the other hand, predictive maintenance can give oil and gas companies access to hoards of data with the power to alert for any faults that may happen in the future—thus enabling companies to avoid costly downtime or environmental disasters. Boosting revenue, lowering maintenance costsFinancially speaking, unplanned downtime in the oil and gas industry is incredibly wasteful. In fact, according to a report published on GE, offshore operators lose out on $49 million to $88 million in potential prots each year. However, for those that engage in a data-driven approach to maintenance, it’s an entirely different story. These companies experience 36 percent less downtime, making them $17 million every year as a result. In adopting a proactive approach to maintenance, data-driven oil and gas companies can improve efciency, increase production by 2-5 percent, and reduce their overall costs by a whopping 10 percent, according to The Oil and Gas Technology Centre. Big player Shell uses what it calls Smart Fields technology to monitor its oil and gas wells. Engineers aboveground have complete visibility into what might impact operational performance —pressure may be low or there could be a leak—and will take the appropriate action to make sure downtime doesn’t occur. Shell says that through this, they’ve recovered 10 percent more oil, and 5 percent more gas from the eld. Case study Let’s now look at a DataRPM case study of a large oil production company based in the Middle East. The company was struggling with the activity of its Electrical Submersible Pumps (ESPs); these are an important component to oil eld infrastructure, and are responsible for 60 percent of oil production worldwide. However, ESPs are pretty unpredictable. When they fail, companies lose out on a great deal of cash. This particular company wanted to use data collected from ESPs to predict when the pumps might fail, thus increasing their overall production output and decreasing downtime across the board. Using intelligent cognitive analytics, 12 different sensors on the pump were analyzed, including frequency, current, voltage, temperature, and wellhead pressure. And the goal? To identify what might be wrong with the ESPs. Or in data science speak, to identify anomalies.With three predictive maintenance modules (for predicting how much oil is produced, understanding the root cause of the breakdowns, and optimizing the pump’s performance to improve how much oil is yielded) the Middle Eastern oil company had its problems solved. With predictive maintenance technology, it is now empowered to nd failure points, analyze them, and predict when a breakdown might happen again. The same solution has been deployed to more than 1000 oil elds worldwide, which collectively, according to the company, have seen a 25 percent spike in oil yield. With gas and oil prices low, the industry is headed through a bit of a rough patch; every company is feeling the bite. However, this doesn’t mean oil and gas organizations shouldn’t take a forward-thinking approach. It’s time to jump on the predictive maintenance bandwagon. With proven cost savings and more security for the environment and workers, there’s no reason oil and gas players shouldn’t be leveraging data today. Sundeep Sanghavi is a Cognitive Computing veteran and Industrial IoT pioneer based in Washington DC. He is CEO and co-founder of DataRPM, a Progress company. They were acquired for $30M by the NASDAQ-listed software giant in March 2017. Savings Across The Board: How Anomaly Detection & Prediction Improves Business Performance In Oil And GasBy Sundeep SanghaviSundeep Sanghavi

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Oilman Magazine / January-February 2018 / OilmanMagazine.com24OILMAN COLUMNThe following is an interview with M-Flow CEO Giles Edward. M-Flow is a UK-based metering company providing repeatable metering products to the oil and gas industry. Responses were submitted in writing and have been left unchanged.Tim McNally: How many founders came together to develop the technology produced by M-Flow, and why was 2012 the year that they set out to improve on it?Giles Edward: As with many step change technologies, M-Flow’s innovations arose because a group of people connected through networks found their curiosity, different skills and access to technology connected a solution to a problem. The foundation of M-Flow included perhaps half a dozen individuals and two or three companies, all of whom made key contributions.For us, the key factors came from a number of industry spaces: an understanding of the operational value and complexity of multiphase measurement; access to emerging composite technologies; experience of cutting edge industrial sensing from outside the oil industry; and experience of building and funding technology driven start-up businesses.2012 was the time when the development of our core technologies and the industry’s heightened interest in new multiphase technologies crossed paths. It’s interesting to reect that in 2012 the industry was in the midst of a high oil price boom, which made getting the company up and running possible. A couple of years later and the oil price crash may have made M-Flow commercially difcult to fund, but in fact the oil price crash has reduced operator margins and improved the drivers for our products to improve production efciency at a low cost.TM: There are always things that can be improved upon in any industry, and this is of course true of the oil and gas industry as well. As such, why did the founders choose to focus on innovating and improving upon the multiphase metering system in particular? GE: I have talked above about the role that fate plays in bringing the solution and the need together, but to focus on the need in the modern industrial world, process control is driven by data, as is ensuring successful production optimisation. The more reliable, accurate, and available the data is, the better you can improve your wells. That comes with an important caveat: if you can’t trust or access the data that’s being created, you can’t expect it to deliver valuable insights. The oil industry has been behind the curve on this. There are cultural conservative drivers for this, but also the rst generation of multiphase meters did not deliver the reliability, usability and low costs required to allow their widespread adoption. Manufacturers delivered expensive technology for niche high-end applications focusing on inherently uncertain ow rate measurement, rather than promoting accuracy and repeatability in parameters that can be more directly measured, such as water cut and gas fraction. This inherently leads to complexity, human intervention, and validation-hungry systems.We saw the need to change the focus if wellhead multiphase measurement was to become the norm across the industry, particularly onshore. The solution we identied was to create a unique carbon bre structure with proven sensing systems embedded inside them. This created a transparent window on the pipe ow, and eliminated the need to have intrusive sensing probes exposed to the uids. This lowered build costs, almost completely removed maintenance costs and manpower intensive interventions, and delivered highly repeatable accuracy.TM: Why is multiphase metering so important to an oil and gas company’s operations while drilling?GE: When operators want to improve margins, they need to reduce costs and improve production. Multiphase measurement can have a big impact on costs through reduced man power required to gather data through well testing and sampling, but it also gives much richer data to make decisions and populate models for reservoir, well and production optimisation. Ultimately, multiphase metering data contributes to longer-term understanding, which improves well design, while also delivering immediate data on the effectiveness of workovers and other operations. It takes accurate measurement to understand the effects of your actions. Unless you can understand and quantify these changes, it’s difcult to get a clear picture of what has worked, and what hasn’t. As we’ve seen rst-hand in the eld, and something that is now becoming widely accepted, the biggest improvement on this front will come from continuous well-by-well data. The sticking point for getting to that point has been cost. Today, with M-Flow, it’s commercially viable. Operators can manage an oileld without having to amend the operational pattern every time something changes at a lower cost than traditional multiphase meters, and with almost zero subsequent opex.TM: I saw you all use a carbon bre structure. How did you all conclude that this was the best option? Was it through extensive testing, trial and error, or previous experience with other materials and technologies that failed to efciently accomplish the job?GE: Accessing the benets of using a non-metallic composite pipe for sensing was the key insight and driver for the formation of M-Flow. The unique opportunities offered by this approach drove the other steps in innovation, which have been incorporated into our products. However, that rst key step into the use of composites was the spark that created the business. The fact that the non-metallic pipe is almost transparent to most sensing systems, particularly electromagnetic ones, meant the complex sensitive parts could be removed from the ow. Immediately, maintenance and calibration issues are avoided, costs come down, and performance takes a big step forward. I often cite the big step forward that medical science saw when we stopped sticking probes in people’s bodies to work out what was ailing them and started to use MRI and similar technologies to see the bigger picture with much less risk. Sensing with composites pipe is an analogous change.• M-Flow’s non-metallic spool piece allows measurement of the full volume of uid ow equally. This unique whole pipe measurement is made with microwave sensors and, when required, gamma density gauges.• This avoids reliance on either spot or narrow chordal measurements which make the meter performance ow regime dependent. This complete, direct measurement removes the uncertainty of ow regime modelling.• The absence of probes or narrow measurement windows in the pipe creates a highly reliable measurement even with heavy oil or solids.TM: A lot of companies we talk to have found certain niches or products in the O&G industry which have not been signicantly improved upon. For example, one rm we spoke with was ST9 Gas and Oil, a company which focused on producing oil and gas-drilling parts at a fraction Interview with Giles Edward, CEO, M-FlowBy Tim McNallyGiles Edward

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Oilman Magazine / January-February 2018 / OilmanMagazine.com25OILMAN COLUMNIt is not uncommon to hear people all across Louisiana talking about the Permian Basin and for a good reason. The west Texas formation saw its rst commercial oil well completed in 1921, and since then, the basin continues to be a predominant supplier of United States oil and gas. Some even say that an oil and gas recovery begins and ends in this portion of West Texas.The Lone Star state has beneted tremendously from the exploration, production, and transportation of oil and gas. Recently, Texas Tech University conducted a report looking at the current and future impacts of the oil and gas pipeline industry on Texas’ bottom line. The report found that between 2014 and 2024, the pipeline industry’s economic impact will generate around $374 billion in economic output, $212 billion in additional gross state product, and contribute $19.5 billion in state and local government revenues, as well as sustain an average of 171,000 jobs. Who wouldn’t be eager to talk about these numbers?In Louisiana, when we see an increase in oil and gas activity, it’s the Haynesville shale formation. For many years, people wrote off the Haynesville as a place that was just too expensive to produce. So the Haynesville was forgotten and companies headed northeast to the Marcellus and Utica formations in search of lower cost oil and gas production. But years of shut-in production due to a lack of pipeline infrastructure are causing companies and investors to return to what some have called a natural gas giant in North Louisiana. This turn of events is very welcomed news.From the 30,000 foot view, it would look as though Louisiana is making a recovery, and the town of Lafayette, which relies heavily on the oil and gas industry, should be getting back on their feet. That is just not the case; the vast majority of oil and gas activity is above I-10. The truth is that many oil and gas companies in south Louisiana, especially oileld service companies, are moving away from southern Louisiana and in many cases, walking across the border to Texas where there is opportunity and willingness to invest. According to those who do business in West Texas, it is not uncommon to see many Louisiana license plates at various Texas restaurants and gas stations.So what is the issue with oil and gas activity in south Louisiana? It’s not that this part of Louisiana is void of oil and gas to be produced or has a lack of pipeline infrastructure…it’s not that we aren’t strategically located on the Gulf of Mexico with some of the busiest ports in the U.S. The reason that investors aren’t willing to invest in south Louisiana is due to the multiple lawsuits against oil and gas companies. What smart investor would spend hard earned capital in a place where he or she is almost all but promised to get sued decades later? The issue of a toxic legal environment was recognized by the United States Chamber for Legal Reform. The group ranked Louisiana as having the worst legal system in the nation.It is time that the people of Louisiana see for themselves why south Louisiana isn’t thriving and why south of I-10 hasn’t kept up the inux of oil and gas activity in Louisiana. Trial lawyers and frivolous litigation are destroying our industry and hurting Louisiana’s nancial footing. It is time we stop reading headlines about jobs leaving south Louisiana and start making headlines about bringing jobs back home. Changing HeadlinesBy Don BriggsDon BriggsOILMAN COLUMNVisit OilmanMagazine.com to read the full interview.of the current cost and with a higher level of durability than products currently in the market. Why do you think that certain components of the O&G operating process go unimproved for a number of years, or even decades? GE: The oil industry has some unique challenges, and those create practical and cultural obstacles to technology adoption. One of the big challenges to the oil industry right at the front end is that there are thousands, or even tens of thousands of wells, feeding and funnelling raw product into the infrastructure of pipelines and reneries that produce the consumer facing products. That diverse network of upstream producers is exposed to high economic and technical risk around their complex base operations, and there are a lot of people to educate and convince of the benets of innovation. Add to that that the bigger, more centralised guys are often working in huge long-term projects and it should not be surprising that adoption can be slow. But that does not mean that change does not take place. The changes to well technology in the unconventional space shows that the industry embraces change rapidly once the evidence is on the table, so the focus is always on building case studies. As a cyclical industry with frequent booms and busts, investment in R&D doesn’t always track periods when companies are willing and able integrate new technologies. Inventions that focus on increasing production are less valuable when there’s a global glut. Similarly, when prices are high and there’s less demand for efciency, it can be difcult for products that produce incremental gains to get a fair hearing. Some technologies persist over a long period, because people just haven’t come up with a better way of doing it. However, I think it’s clear the multiphase area we are in is in a phase of change. Multiphase metering has simply not penetrated into the onshore space; we see companies continuing to invest in traditional multiphase meters. But the body of evidence is that these produce less accurate and reliable results at high costs than will drive a cultural change, and that’s a difcult case to sell. At present, it’s rare to nd an operator claim to get better than 10% +/- accuracy from their multiphase meters. The traditional multiphase meter companies are looking to nd ways to make their last generation products more competitive and suited to the costs and operations of the US onshore environment. To address these weaknesses, cumbersome and expensive test separators remain in operation; but they provide only piecemeal or fragmented information that rarely delivers more than limited value. What it will take to see real change is smart monitoring systems throughout the upstream production chain.TM: What are the main advantages for operators using the M-Flow multiphase metering system when compared to the traditional metering systems found in the market?

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Oilman Magazine / January-February 2018 / OilmanMagazine.com2626OILMAN COLUMNEnergy, and in particular the oil and gas industry, has always been one of the foundations of both the economy and the nancial markets. The world has run on oil and gas for decades, to the extent that oil prices have been among the key determinants of recessions and market crashes. In recent years, that impact has been just as strong. The rise in oil prices in the 2000s—and the recent collapse—shook economies and governments around the world.When you look at the cause of this collapse and the subsequent market behavior, however, some interesting parallels to history emerge. In my view, these parallels can help us understand what has happened and, more important, what is likely to happen next.The past: “Wildcatters” to frackingFirst, let’s consider where the oil industry came from. It was originally dominated by “wildcatters,” cowboys who drilled as much as they could, anywhere they could. When overproduction crashed prices, they declared bankruptcy and moved, starting over when prices rose again.Then, a handful of businessmen, John Rockefeller chief among them, took the industry and organized it. The group bought and controlled larger and larger parts of the whole, until it was in a position to manage production and prices. Standard Oil, at its peak, pretty much owned the industry and could set prices at will. At least this was the case until it was broken up into the smaller (but still huge) companies that we think of as the U.S. oil industry even today.A similar scenario played out at the international level. Countries produced and sold as much oil as they could, until the arrival of OPEC (the Organization of Petroleum Exporting Countries) brought them together to manage and limit production—and force prices up much higher. As a competitive market, oil prices crashed. When a monopoly or oligopoly took over, prices rose to everyone’s benet. Small wonder, then, that countries around the world replicated Rockefeller’s playbook.All of this worked, of course, until cheating became too rewarding. But prices were still much higher than they would have been, as open competition and production were kept out of the market. Then came the fracking revolution.Fracking brought the return of the wildcatters, thousands of small companies drilling when and as fast as they could. These companies produced as much as possible in order to pay their bills and, consequently, drove prices down to levels that had not been seen in decades. The energy industry, which had developed in an era of prices managed by OPEC, got hit hard.The present: Solving the oversupply problemWhich brings us to now. The collapse in oil prices largely solved the oversupply problem, as many of the smaller companies went bankrupt. It also laid the groundwork for a return to a more managed price structure. Large companies could now buy up those assets on the cheap, taking a much larger share of production—and enhancing their ability to once again keep prices higher than they would have been in a free market.Back to the future?As this process continues, I suspect that the next 10 years will be very similar to the later stages of the last industry consolidation. The economy and investors will see stable prices, which has largely been the case since the initial collapse. But we will also see prices that increase over time, which so far has also been the case. Oil will no longer be a free market with the wild price cycles that entails, but a more managed one. In many respects, it will look much more like the 1990s than the boom period (in oil prices) from 2003 to 2008 or the bust period from 2014 to recently.Overall, the effects should be positive. Markets and the economy thrive on stability. While the collapse in oil prices was a tailwind for many sectors, the damage to the energy sector wiped out many of those gains. Moving forward, energy should be neither a signicant headwind nor a tailwind, but a solid foundation—which is what a sector this vital should be. Oil Prices Collapse: Is the Energy Industry Going Back to the Future?By Brad McMillanBrad McMillan

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Oilman Magazine / January-February 2018 / OilmanMagazine.com27OILMAN COLUMNMarketsandMarkets projects that the AI in the oil and gas market was worth $1.42 billion in 2016 and is expected to grow at a CAGR of 12.66 percent from 2017 to 2022 to reach a market size of $2.85 billion by 2022.Improving operational efciency in the oil and gas industry and predictive maintenance to avoid costly downtime will drive the articial intelligence in oil and gas in the coming future.The growth of the articial intelligence in the oil and gas market can be attributed to the increasing big data technology in the oil and gas industry to augment E&P capabilities, signicant increases in venture capital investments, the growing need for automation driving the oil and gas industry, and tremendous pressure to reduce production costs.In the coming years, the market is expected to witness the highest growth rate in the North American region. This growth is due to increasing adoption of AI technologies by oileld operators and service providers and the strong presence of prominent AI software and system suppliers, especially in the US and Canada. The Middle East and Africa are the fastest growing markets due to increasing investments in start-ups for AI implementation, which would further raise the demand for AI in the near future.The research study of AI in oil and gas, further segmented into Type, Function and Application Type is classied into hardware, software, and services. The software segment led AI in the oil and gas market in 2016. Software in AI in the oil and gas market are applicable in upstream oil and gas exploration and production activities. The hardware segment in AI in the oil and gas market is expected to grow swiftly during the forecasted period (2017 to 2022), mainly due to the increasing requirement for sophisticated hardware system congurations and components capable of handling massive data, including, but not limited to Tensor Processor Unit (TPU), Graphic Processing Unit (GPU), Resistive Processing Unit (RPU), Field Programmable Gate Array (FPGA), and Visual Processing Unit (VPU) to install software-based AI capabilities. Function is classied into predictive maintenance and machinery inspection, material movement, production planning, eld services, quality control, and reclamation. Preventive maintenance is the largest and one of the fastest growing segment in AI in the oil and gas market. Predictive maintenance aids in addressing costly downturn by predicting maintenance schedules for equipment to prevent the possibility of equipment failures and, thus, save millions of dollars. Application is classied into upstream, midstream, and downstream. The midstream segment is expected to grow at the highest CAGR in the global AI in oil and gas market during the forecast period. The growth in the shale oil and gas production in the US is creating the need for an expanded midstream network of pipelines, rail, tankers, and terminals. AI is widely used in the midstream sector to gather data during the transportation process through pipelines and provides the same to the human-machine interface to control the process. In the oil and gas industry these tools have been used to solve problems such as pressure transient analysis, well log interpretation, reservoir characterization, and well selection for stimulation, among others. Key players:IBM (US), Accenture (Republic of Ireland), Google (US), Microsoft Corporation (US), and Oracle (US). Artificial Intelligence: The Future of Oil & GasBy MarketsandMarkets, Inc.Image Credit: MarketsAndMarkets, Inc.

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Oilman Magazine / January-February 2018 / OilmanMagazine.com2828Gov. Burgum’s Ambitious Challenge to Bakken Producers and InvestorsBy Jason SpiessOILMAN COLUMNTis’ the season for annual meetings, but North Dakota Governor Doug Burgum caught many people’s attention with his public speech that was making the rounds.Burgum took full advantage of his invitation to address industry leaders on what direction he would like to see the Bakken go. He laid out four basic challenges:• Produce 2 million barrels day.• Create an industry standard of zero spills. • Develop an innovative collaboration with coal. • Take the Bakken to the next big step in natural gas gathering.As Burgum spoke, many people in the audience dropped their jaw, taken aback by the ambitious goals proclaimed by the entrepreneurial-rooted governor.On the other hand, there was a handful of people nodding in agreement with the governor, smiling because someone is laying the gauntlet down in a way that will attract new investment into the Bakken shale play.Lynn Helms, director for the North Dakota Department of Mineral Resources, is the state’s top regulator and major source of the Bakken’s knowledge. He understands what message the Governor is trying to get across.“We’ve lost that edge, that rst place in competition for capital has shifted to Oklahoma and Texas, largely because the perception is there that they can produce oil cheaper and faster, they are closer to markets,” Helms said. “...If North Dakota is going to take rst place again, in terms of competition, we’ve got to become cutting edge rst in technology, in regulation, in innovation, in value added in all the areas we have been talking about.”Helms added that by no means is this a Chicken Little situation, but rather an opportunity to reset our goals as a state and reevaluate how we attract investors.“We haven’t exactly fallen behind, but we haven’t continued to innovate to the extent that we’ve maintained rst place in terms of where capital wants to go,” Helms said.From Burgum’s perspective, starting out with simple goals creates a path of achievement. When asked where he pulled the number “two million” from, Burgum looked to basic grouping and the Bakken’s recent history.“It’s a nice round number and it is the next sort of logical milestone and number for us,” Burgum said. “But when you go back to 2007 we were doing 30,000-barrels-a-day; I don’t think anyone thought one-million-barrels was possible.”Burgum continued, saying the 2 million barrel goal is very easy in theory, at least when you take out the human element and focus on the math.“To get to where we are today, about 1.1 million, to 2 million is just a math problem. It’s a math problem the entrepreneurs in this industry are solving,” Burgum said.Consequently, it’s a problem they’re solving every day at the well, in the ofce and in board rooms.Listening to Burgum explain his challenge, it is almost as if it is really more of a math process rather than a problem.“You solve it by one, drilling a hole in fewer days than you did before, which is what Bakken producers are doing. We have people drilling wells in 12-14 days which used to take 30 days,” Burgum said. “And when you are talking about a well in North Dakota and the Bakken, that’s a two-mile vertical and two-mile lateral, and they are getting that done in 12-14 days.”Simple math note: many of the North Dakota producers have continued their efciency and streamlining ways to the tune of producing twice as many wells per month. So that’s one part of the math equation. “The other part is what do you get out of that well after you drill it,” Burgum said.Historically, the Bakken curves have been pretty consistent and the producers have gotten used to it. But now, with the advent of “super-fracs,” the game is changing once again.“Now you have some of the folks working through formulas. Generically, some folks are calling them ‘super-fracs’, but if you are putting more sand and water down these wells, some people are seeing a big jump in their production curve, in terms of what is produced per well,” Burgum said.Circling back to the simple math of 2 million barrels a day in the Bakken, Burgum resets and revisits the logical, mathematical path.“So if you have more wells and more barrels per day per well, that sets you on the path,” Burgum said. “And when you do the second one and have higher productivity, that’s going to attract capital.”Back to the money. Once the math problem is solved, you still need to attract the investments and historically the WTI Bakken discount has been an ongoing issue.“We got to 1.1 million barrels a day with a huge constraint on takeaway capacity and with the resolution on DAPL last year adding 500,000 barrels a day of takeaway capacity,” Burgum said. “My Lt. Gov Brent Sanford and I have talked to two oil companies that are saying right now, in the last month, their oil was being purchased at zero discount at WTI.”Burgum explained how the state has worked with a variety of industries in response to market conditions and the Bakken discount.“A few years ago there was a big spread and that was brought down a bit by more train loading facilities being built, but many times there was still a $5,6, or $7 spread with the hope that the Dakota Access Pipeline would bring it down to $2, but now I have people telling me there is zero spread,” Burgum said.Both Helms and Burgum agree that the Bakken has done an excellent job investing in infrastructure to ensure more takeaway capacity so the 2 million barrel goal can be achieved.“That improves the bottom line for the people who are thinking about where they want to invest their capital,” Burgum said. “So if we can attract the capital, drill more wells per month and have those wells be more productive that puts you on the path to 2 million barrels a day. It’s pretty simple.”Assuming the capital investments are there and the rigs continue to rock the Bakken, will the infrastructure even be able to handle 2 million barrels a day?“It’s going to take continued investment, but a lot of the work that has already been done with pipeline and the roads, that’s increased our capacity and some of that has room to grow,” Burgum said. “It will take more, but North Dakota has demonstrated to the industry that we are willing to step up and do our share as a state and do the public infrastructure to support the private capital coming in.”Simply put, the math is there and the investments are coming so the Bakken can produce 2 million barrels a day in the near future.“It will take more, but it is a path that is very doable,” said Burgum.

Oilman Magazine Jan/Feb 2018

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