Oilman Magazine Mar/Apr 2017 : simplebooklet.com

LETTER FROM THE PUBLISHER Are you feeling the market rebound What I ve heard from industry sources and the numerous reports I ve read the oil and gas market is recovering although slowly Last November OPEC agreed to remove 1 2 million barrels a day from their global oil production until July of this year We re hopeful that they will renew the agreement for another six months when they meet again in May That s one positive checkmark we re heading in the right direction The OPEC agreement pushed Brent oil above 50 a barrel from its terrible low of 26 in February 2016 That s the second positive checkmark The third checkmark is that shale is gaining momentum in several resource plays especially the Permian Basin and companies are cautiously hiring again in the three states OILMAN covers Anadarko recently announced that it s moving 200 employees to its Midland Texas office With all the positive news many are expecting to see oil above 60 by 4Q17 Many in the industry are also hopeful that this turnaround will increase drilling activity in the Gulf of Mexico Which is the topic of this issue Offshore exploration and production expenses are much higher than onshore take shale production for example and with a lower price per barrel as we ve seen it s not cost effective for companies to drill offshore Many companies are turning to big data digital technology and the internet of things IoT to improve future exploration and production Equipment maintenance scheduling is an area companies are starting to use the data they capture GE Oil Gas uses data analytics to decrease the amount of time equipment is offline and improve its reliability by accurately predicting when servicing will be needed and schedule it in advance By taking advantage of data to improve efficiencies offshore operators will be in a better position during the market turnaround and reap the rewards Emmanuel Sullivan Publisher OILMAN Magazine Don Briggs Mark A Stansberry Mark A Stansberry Chairman of The GTD Group is an award winning author columnist film 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 Spiess Jason 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 Mac s 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 fields with diverse guest ranging from U S Senator Mike Enzi WY to the traveling roadside merchant selling flags to the local high school football coach talking about this week s big game 2 MARCH APRIL 2017 PUBLISHED BY Oilman Magazine LLC P O Box 771872 Houston TX 77215 800 562 2340 OilmanMagazine com PUBLISHER Emmanuel Sullivan publisher OilmanMagazine com 800 562 2340 Ex 5 EDITOR Jennifer Delony DIGITAL CONTENT MANAGER Tim McNally CONTRIBUTORS Biographies Don 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 oilfield 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 MAGAZINE Joshua Robbins At Beachwood Marketing Group our mission is to market oil and natural gas properties in the most cost effective and efficient way We strive to provide excellent leadership and unparalleled service for each of our clients Josh has been instrumental in defining 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 Eric R Eissler Eric is the former editor in chief of Oil Gas Engineering magazine and previous to that worked as an editor for Dubai based The Oil Gas Year magazine He is currently an administrator at Northwestern University in the McCormick School of Engineering Joseph DeWoody Joseph P DeWoody jpdewoody is the president of Clear Fork Royalty an oil and gas royalty investment company located in Fort Worth Texas Clear Fork Royalty works with accredited investors trusts and family offices to provide portfolio access to oil and gas mineral rights and royalties to hold for long term investment through various direct investment vehicles Joseph was selected by Oil and Gas Investor Magazine as a winner of the Top 20 under 40 Award and by TIPRO and Texas Monthly Magazine as a Texas Top Producer Joseph is a member of the Young Presidents Organization YPO He was appointed by Texas Governor Rick Perry to a six year term on the Texas Board of Professional Geoscientists He serves on the Board of Directors for the National Stripper Well Association and the Texas Alliance of Energy Producers Steve Burnett I 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 oilfields 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 first 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 Oilman Magazine March April 2017 OilmanMagazine com GRAPHIC DESIGNER Kim Fischer CONTRIBUTORS Don Briggs LOGA President Mark Stansberry Chairman of The GTD Group Joseph DeWoody President of Clear Fork Royalty Steve Burnett CrudeOilCalendars com Story Sloane III The Sloane Gallery Houston Texas 281 496 2212 Eric R Eissler Administrator at Northwestern University McCormick School of Engineering Jason Spiess TheCrudeLife com Joshua Robbins CEO of Beachwood Marketing SUBSCRIPTIONS OilmanMagazine com subscribe ADVERTISING 800 562 2340 Ex 1 advertising OilmanMagazine com OilmanAdvertising com Copyright 2017 by Oilman Magazine LLC All rights reserved Reproduction without permission is prohibited All information in this publication is gathered from sources considered to be reliable but the accuracy of the information cannot be guaranteed Image credits The Sloane Gallery Houston TX 123rf com

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OILMAN COLUMN Oilfield Deal Options in an Early Market Recovery Where Opportunity Abounds By Duane Donner Sentiment has been increasing in the oilfield in recent months and subsequently mergers and acquisitions M A have been on the rebound The current optimism is being manifested by the sustained oil prices uptick in rig count and increased oilfield service work As a result investors are beginning to re enter the oilfield intending to place new bets or double down on previous positions This time around we are seeing a different flavor of capital injection coming in the form of more flexible and creative transaction types from a range of buyers and investors These deals range from minority recapitalizations and growth equity concepts all the way to private debt The spectrum of buyers and investors is also diverse ranging from wealthy investors family offices as well as oilfield focused private equity and debt firms Each deal and transaction type has its own nuances and pros and cons The number of oilfield related transactions over the last few months has significantly increased driven by the growing sentiment Founders most recent oilfield deal came in the form of a nontraditional debt recapitalization We were able to work with the management team at Circle 8 Crane Services Circle 8 to identify capital market opportunities that could support their needs Circle 8 is a leading provider of operated and maintained crane lifting services to the oil and gas commercial and industrial markets in the U S with locations throughout Texas and Louisiana They wanted a more flexible lending partner that could support their desire to expand the business They found this partner in Trive Capital a Dallas based firm This flexibility was key to this transaction Photo Credit macgyverhh www 123RF com as Circle 8 management sees a real opportunity to take advantage of the next upswing in the oilfield A non traditional debt recapitalization is representative of the creative and flexible capital that is becoming more available to companies in a market where traditional banks have not yet returned to actively lend in the oilfield Many middle market oilfield service companies continue to negotiate with their banks yet these lenders simply do not have the flexibility or risk tolerance to allow for a debt restructure Non bank private debt is one of the alternative sources of debt capital for these companies Investors are getting imaginative as they view opportunities that come on the tail end of an over two year decline in the industry With many oilfield service companies in a challenged state most have a thesis to partner with quality groups who weathered the storm and are positioned to take market share while riding the industry wave back up This strategy executed successfully will help to increase revenues and lift margins It has been an impressive feat for these companies to have survived the downturn and a flexible capital partner could be the solution needed to take advantage of the timely opportunity of hitting this cycle in the upturn In conclusion we expect these transactions to continue to take place in the coming year Look for capital to strategically and creatively enter the market to take advantage of the market share opportunity for the companies who have outlived the downturn Duane Donner is Managing Partner of Founders Investment Banking Founders foundersib com is a merger acquisition and strategic advisory firm serving middle market companies Founders focus is on energy industrials and industrial technology companies throughout the United States Oilman Magazine March April 2017 OilmanMagazine com 7

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OILMAN COLUMN Unmanned Aircraft Systems Are Flying High in Oil and Gas By Emmanuel Sullivan The oil and gas industry is typically slow to respond to new technology outside of their comfort zone They re on par with the FAA s inability to quickly create rules regulating unmanned aircraft systems UAS also referred to as drones The biggest surprise was around the very methodical approach this industry as a whole seems to take when it comes to embracing new technology Todd Chase a program manager for UAS at Oceaneering told Inside Unmanned Systems I understand where they re coming from though They re very entrenched in the proven safety processes which of course isn t a bad thing They want to stick with tools and processes that they know will work and when the stakes are as high as they are for many of these organizations this approach is understandable The industry is turning around to embracing the benefits of using UAS in onshore and offshore applications There are numerous benefits to using UAS technology ranging from safety and cost savings to enhanced data and less personnel In many cases drones are refining and augmenting something these people were already doing Chase said This technology enhances certain tasks and can eliminate the human footprint in a dangerous area to some extent or minimizes exposure to risk Upstream Use Offshore operators can utilize UAS technology during design construction installation and operation to ensure their asset performs as intended There is no longer a need to send personnel out in the field to take measurements to add a new offshore structure Unmanned 10 aircraft systems have the capability to create a 3D model of the current structure and merge that information with a desktop CAD program that personnel will then use to continue the design of the new structure I can bring in the file and upload it into a CAD like program and draw the blueprints off that CAD program Clay Kroschel CEO of Unmanned Ad Hoc Industries Inc told Inside Unmanned Systems That mitigates days of overhead and traveling Typically guys would need to fly out to the oil rig and be out there for four or five days Helicopters are expensive and take up valuable real estate on the rig I can go out there on a boat and do a 15 or 20 minute flight and get the whole oil rig in a 3D point cloud then bring that back to the client and put it in a CAD program Oilman Magazine March April 2017 OilmanMagazine com UAS eliminate the need to send workers out into the field they offer better data and they reduce the chance of mistakes Midstream Use The use of UAS technology in pipeline inspection has increased the time it takes to collect data and essentially saves oil and gas companies plenty of money However the FAA prohibits operators from flying beyond direct line of sight That limitation makes this application challenging Ian Glenn CEO of ING Robotic Aviation told Inside Unmanned Systems Helicopters have the authority to fly They re dangerous and loud and not environmentally friendly but they have the authority to fly There s absolutely no reason for them to fly when any of

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OILMAN COLUMN the drones we have would do a better job cheaper and faster Glenn said We need the ability to fly 150 feet or lower down rights of way so we can better collect the data It s not a technology challenge it s purely an airspace access issue With UAS we can get better data and rapidly push it out to those who need to make decisions based on that data Besides the limitations oil and gas companies are happy with the results UAS provide They re able to show exactly what the right of way looks like use the technology in harsh weather and assess wildlife conditions for new pipelines all without leaving the office Downstream Use UAS technology has been a useful tool for inspecting refinery and chemical plant facilities Often times when inspecting a flare stack the operator needs to shut it down This leads to a loss of productivity when you shut down a major portion of the plant operation Having a flare stack shutdown for manual inspection takes a week or more It needs to be cooled down then they have to bring it back up to its operating temperature David Proulx VP of product and marketing for Aeryon told Inside Unmanned Systems Then there s the risk of having somebody visually inspect it If you introduce a small UAS you can keep the stack operating while you do routine maintenance and inspection of the infrastructure You can perform the maintenance without having to shut down and without losing profits The real value in UAS technology while using it downstream is safety The technology allows operators to perform tasks without putting personnel in dangerous positions Challenges Ahead Oil and gas companies are still uncertain about the full capabilities that UAS technology can do for their business Companies are also uncertain about FAA regulations and how to meet legal and safety standards while using UAS technology Most of them are not even thinking about UAS technology but once we show them what it can do they re just blown away Especially with the cost savings Kroschel said A lot of them assume we re talking about large military drones but you can t have a big drone like that around a chemical plant It has to be a VTOL vertical takeoff and landing system You have to get up close and personal depending on what sensor the UAS is using and what information they need The FAA is still writing rules and regulations that will shape the technology for future use This prevents oil and gas operators from taking on the technology in house There are just too many steps and levels of certification and protocol you must follow to make use of the technology The majority of oil and gas companies are hiring outside vendors to walk them through the technology and facilitate the entire UAS process to maximize its benefits Safety and Dividends Go Together Like Oil and Gas We want to fuel your profits with safety that s why we provide group and individual dividends to companies that keep their people safe Plus as members of the Texas Oil and Gas Association Safety Group you may receive a greater discount on your workers comp premium We re helping our policyholder owners be safer and stronger and we think you are going to find it very rewarding To see how safety can power your dividends contact your agent or Jim Sierra at 512 478 6631 or jsierra txoga org While we can t guarantee dividends every year Texas Mutual has returned more than 2 billion to safety conscious policyholder owners since 1999 Texas Mutual Insurance Company is rated A by A M Best Company 2017 Texas Mutual Insurance Company Oilman Magazine March April 2017 OilmanMagazine com 11

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OILMAN COLUMN Stripper Wells Go from 1 BBL to 15 BBL Per Day By Charles Jennings Jenfitch LLC working with a private independent oil service firm from Houston recently conducted a field study on four different low producing oil wells stripper wells in Pecos County Texas These wells were generating one to two barrels of oil per day Using several different methods of injecting JC 9450 into the well the production increased up to 15 barrels per day for five days and then dropped to 10 barrels per day for two weeks The service operator then injected five gallons of JC 9450 per day into the well casing The well continued to generate 15 barrels every 12 hours of operations Hydrogen sulfide was eliminated in the gas phase and liquid phase Paraffin and asphaltenes known to be a problem in the system were minimized JC 9450 changed the surface structure of paraffin and asphaltenes so that it would not form a deposit The produced water from the operation was tested for iron bacteria and hydrogen sulfide The results showed no detectable levels of iron bacteria and hydrogen sulfide It was observed that the produced water looked cleaner Stripper wells are defined as oil or gas well with an average production of 15 barrels or less per day of oil or gas equivalent The average production from a stripper well as stated in a study conducted by the National Stripper Well Association NWSA is one to two barrels per day In the U S NWSA estimates there are over 770 000 stripper wells operating that contribute 11 3 of the U S oil production and 8 3 of U S gas production Most of the stripper wells sit on top of untapped resources It is Photo Credit ronniechua www 123RF com estimated between 50 70 of the oil beneath the stripper well cannot be removed for three reasons pressure permeability and paraffin As these fields begin to produce oil or gas at the wellbore the pressure begins to drop resulting in lower production With the amount of thermal energy heat entering the wellbore you see a drop in production related to permeability The oil in the well begins to cross its cloud point threshold and paraffin crystals start to precipitate as the oil moves from the pore space to the wellbore opening If a well s flowrate is high enough the continuing thermal mass of the oil entering the wellbore can keep the paraffin in solution so that the buildup on the wellbore is kept to a minimum If the flow rate decreases the paraffin will create a thick deposit in the wellbore which will further inhibit the flow oil An additional factor is the biofilm in the wellbore and formation The biofilm will provide additional sites for paraffin to deposit A biofilm generates a sticky material called extracellular polymeric substance EPS The EPS attracts the paraffin crystals asphaltenes and iron sulfide to form a deposit on any surface JC 9450 is a new technology that uses reactive oxygen species ROS to form a strong oxidizing agent that quickly reacts with hydrogen sulfide iron sulfide biofilm and bacteria It is also very effective as an emulsion breaker and micro flocculent in the treatment of produced water It can be used to destabilize paraffin and asphaltenes JC 9450 is a green technology and is environmental friendly JC 9450 generates a high concentration of hydroxyl radical ions that react to form mineral oxides that are inert Charles Jennings is a General Manager at Jenfitch LLC and can be reached at 925289 3559 or www jenfitch com Oilman Magazine March April 2017 OilmanMagazine com 13

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OILMAN COLUMN Accidents are Down but Insurance Is Up in Oil and Gas By Eric R Eissler The oil and gas industry is a volatile marketplace Not only does the price swing up and down but pipes swing around come uncoupled break burst and worst case explode An oilfield can be like a minefield as accidents are just waiting to happen Company leaders must hire executives who can navigate the insurance industry like a tiger in the jungle Choosing the right kind of insurance and how much to buy may present a challenge but by understanding the insurance system the process becomes easier to manage Insurance Iceberg Runs Deep Before choosing insurance an energy company must assess itself and determine where it works what it does and what kind of insurance liabilities might arise based on location and work For example if a company works in an unstable part of the world it might face problems such as terrorism regime change sudden policy shifts political risk and on offshore physical damage to rigs and capital equipment These risks are just the tip of the insurance iceberg each category of risk runs much deeper State of the Industry There are several major trends that impact the oil and gas insurance industry entering into 2017 1 The oil and gas industry has become safer over the past several years due to the rise of technology that has removed a lot of human elements 2 Despite the lower rates of accidents when one does occur insurance claims 14 Photo Credit stokkete www 123RF com are generally higher than in the past due to the use of this more complex technology coupled with the entrance into emerging markets 3 The improvements in safety over the past several years along with tighter risk management budgets at energy companies have created an increasingly competitive energy insurance market which may negatively impact the value of energy insurers 4 The past two years have been hard on the industry due to the high production from Saudi Arabia and OPEC members The higher production has flooded the market and Oilman Magazine March April 2017 OilmanMagazine com pushed prices down to incredibly low levels not seen for more than 10 years The low prices have eaten into profits and put many U S based companies out of business or lead to being gobbled up by larger corporations 5 Insurance companies such as Allstate have lost millions in bonds due to the decline in oil prices According to Bloomberg Business Allstate lost some 75 million after a major plunge in crude at the end of 2014 early 2015 Most insurance companies hold bonds in the energy industry so Allstate was not alone with its major bond losses These five factors have made insurance

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OILMAN COLUMN more expensive for this industry However 2017 has proved to be a potential boon year for the oil and gas industry with Brent crude at 55 45 by mid January This should increase profits and put the industry back on track Rates Fall as Profits Rise Time to Shop Around While the prices are still going to be high compared to the pre fall of oil prices this year offers relief with a renewed industry Profits will climb for oil companies and insurers bonds will also climb in part helping to offset the associated costs of insurance With that in mind it will be a good time to review your company s insurance coverage and assemble your risk management team to start scouting out new potential insurers and the better deals that they can offer as quarter two ramps up When buying keep in mind your company might be better off to have more coverage especially if a lot of your equipment and workers have been idle during the oil price recession Equipment will need to be primed and worker s skills will need to be re sharpened as they get back on the rigs The industry has trended towards fewer accidents but when they do occur they have a bigger impact on people equipment and environment Detailed Risks Associated with the Oil and Gas Industry Builder s Risk Insurance Cyber Risk Directors Officers Liability Employment Practices Liability Errors and Omissions Longshore and Harbor Workers Compensation Act Political Risks Confiscation Expropriation Nationalization Deprivation Insurance Pollution Legal Liability Products Liability Recall Professional Liability Riggers Legal Liability Marine Liability Insurance Terrorism Maritime Employers Liability Transport and Cargo Legal Liability On Offshore Rig Property Damage Josh Robbins Beachwood Marketing Group Credit Edgar Lance Photography Oilman Magazine March April 2017 OilmanMagazine com 15

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Reduce inspection times by 87 with Spotter the Customizable Inspection App NO MORE PEN AND PAPER CREATE unlimited mobile inspection forms INSPECT on offline from any iOS Android tablet REVIEW results immediately from the web FREE Trial Account 225 590 5003 spotter envoc com spotterinspectionapp com InspectionApp OILMAN CROSSWORD PUZZLE ANSWERS Across 1 Health Safety ______ 7 Select with for 9 Tugs along 10 North America s Inland River Response Conference is ___ Waterways 12 Compass direction for short 14 North easterly state abbr 15 Balancing device 16 Where deals happen 19 Really impressed 21 Stumbling expression 22 Strong 24 What is Fueled by SPE AAPG SEG 26 Accountant s term for up to now 27 Length measurement abbr 28 ___ Technology Conference 31 ___ Capitan 33 Happens every two years in Lafayette Louisiana 16 34 35 36 37 38 Sixth sense for short Place for testing Capital where Capitol Hill is Short way of describing a group that improves or introduces new products abbr Early summer month Down 1 2 3 4 5 6 8 11 Oklahoma Oil Gas ____ The three Vs of big data are Volume Variety and ____ Company that puts buyers and sellers together through oil and gas conventions The Corrosion Conference Expo for short New Year s ___ Cargo measurment Golf driving area Gulf state abbr 13 14 17 18 20 23 Oilman Magazine March April 2017 OilmanMagazine com The latest Viral internet image Society of ___ Engineers The industry is embracing a Digital ____ Sci fi writer Doc Smith Alien in film 24 25 29 30 32 Invisible At low cost Confronted Big ____ Quebec lake word

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OILMAN COLUMN Finding True Market Value of Assets By Josh Robbins When historic oil companies families like Yates Clayton Williams and Bass sold out in the first quarter of 2017 it started a wave of transactions that we expect to carry through the rest of the year and deep into 2018 The oil business is very much an extended family and when the families start to cash their chips in those around them start to wonder what their chips are worth as well But what is the true market value of an asset Judging by the amount of deals at NAPE that were asking far too much the answer to that questions seems to be it depends First it s very important to know that in the oil and gas world there are two very different paradigms taking place These paradigms are radically changing the approach many publicly traded companies are taking to purchasing assets The two ends of the spectrums are the finance stock value and the traditional value On the one side of the spectrum traditional value is very common which is based solely on the actual reserves of an asset the production decline curve and the costs of running the well including the expenses and taxes associated with it Focus for additional value can be found in PUD locations potential reworks and increased net revenue Increased or decreased value of an asset depends on geographic location depths held within that geographic location and size of the acreage block On the other side of the spectrum the finance stock value of the market is removing nearly all of the data above when valuing an asset position or company purchase The value is not actually based on the oil and gas assets The value is created on Wall Street allowing companies to purchase in the buzzword areas that help raise their Josh Robbins Beachwood Marketing Group Credit Edgar Lance Photography stock The stock increase in some cases completely wipes out the cost of purchasing the assets As these assets or entire companies are purchased the asset decline curve still exists and therefore forces the new owner to cut costs With these company acquisitions that usually means the employees from the recently bought out company will be integrated or removed if the position is already filled By cutting the workforce the buying company is removing operating expenses and will show an immediate increase in profitability which will in turn in theory increase the stock value even more When the two paradigms face each other there is no way to evenly equate value of an asset This causes price increases in specific areas which will soon spread through most of the oil patch New buzzwords will continue to be created throughout the year The deal flow therefore will continue to be high among publicly traded organizations for an extended time Actual transactional volume with independent oil and gas firms will slowly decline as we enter into the third and fourth quarter as the money gained from increased price per barrel and MCF will be reallocated to infield development We expect service prices to continue to rise but with some pushback from operators Instead of allowing a 20 hike in prices independent operators will switch vendors because higher oil will bring additional vendors to the market With service companies competing for business the oilfield will continue to grow throughout all of 2017 The true market value of an asset depends on many things but it comes down to just one Who s buying it Oilman Magazine March April 2017 OilmanMagazine com 17

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FEATURE The industrial internet of things is transforming the offshore oil and gas sector One estimate claims that a typical offshore oil platform generates up to 2 terra bytes of data per day that s the equivalent of 1 million digital camera images Cisco in its report A New Reality for Oil and Gas said that if oil and gas companies properly leverage the data they produce they can capture 600 billion of value at stake through 2025 For a 50 billion oil and gas firm that translates to an 11 percent bottom line improvement the report said That doesn t mean that offshore companies are all jumping on the big data bandwagon instead they re carefully evaluating the possibilities to understand what data and the analysis of data can do for their operations To get a glimpse into where the offshore sector is headed in terms of data and its applications and what systems and services it is leveraging to get there take a look at BP At the end of last year BP announced it is working with GE on the deployment of a new integrated system called Plant Operations Advisor POA BP said that it started using POA to manage the performance of one platform in the Gulf of Mexico and given success there the company will deploy it to other BP facilities around the world this year According to BP POA will help prevent unplanned downtime and improve facility reliability by helping engineering teams respond quickly to issues as they occur in real time The POA tool was built on GE s Predix operating system a software platform that is used to collect and analyze data from industrial machines This cloudbased platform as a service works at industrial scale for asset performance management APM by connecting machines data and workers APM lies at the heart of this next level digital system It puts enterprise asset 20 management software together with realtime information from production and data analysis and advanced analytics In a nutshell it allows companies to see their assets make decisions to optimize those assets and optimize organizational results ARC Advisory Group in a report on how APM overcomes challenges in oil and gas said that currently too much time is dedicated to collecting aggregating and analyzing available data rather than converting it to meaningful business decisions That is due to the application of data to disparate systems with no integration APM alleviates these issues principal T D for OSI Soft one of the strengths of PI is that it allows platform managers to perform predictive analytics He said that PI has different modules that allow for the input of mini analytic calculations based on certain attributes or time frames to create an operational band If operations go outside of that band for example plus or minus 1 percent for more than three minutes in a row PI notifies managers that an alarmlevel event is immanent This feature gives managers a visual on possible problems before they happen a huge advancement in data functionality These solutions based largely on today s increased connectivity use of open standards and increasingly more capable platforms for predictive and prescriptive analytics enable oil and gas companies to move from largely re active conventional approaches for managing their critical production and automation assets to today s far more effective proactive and predictive approaches the report said Srikanta Mishra Ph D Institute Fellow and chief scientist for energy at nonprofit Battelle says his organization offers analytics to the oil and gas sector under its Elucidata service According to BP the POA system rapidly integrates operational data from producing oil and gas facilities to deliver notifications and analytical reports to engineers so they can identify operational performance issues before they become significant The system provides simplified access to a variety of live data feeds and includes visualization capabilities including a real time facility threat display It also incorporates an extensive case management capability to support learnings from prior operational issues According to Mishra the Elucidata service is an umbrella for a process that Battelle provides to integrate data from multiple sources GE plans to make this technology available to the entire oil and gas industry More Options Offshore companies have also turned to OSI Soft s PI System for collecting analyzing and visualizing data for realtime management The PI system allows a company to integrate whatever data they want and create a customized display of that data According to Kevin Walsh industry Oilman Magazine March April 2017 OilmanMagazine com Offshore companies have been slow to engage with their data at the level offered by Battelle but Mishra says they are interested The task that Battelle undertakes is intended to bring all of this data into one easy to use platform that can then be utilized for knowledge and discovery he said The idea here is to learn from the data and then use that to make decisions Under the knowledge discovery component of Elucidata Battelle offers clients a combination of advanced statistical capabilities and in house subject matter expertise In addition Mishra said that Battelle captures information from the knowledge discovery component in customized software solutions and user interfaces that makes it easy for managers and decision makers and on the platform operators to make decisions that are based on what has happened in the past and from which robust insights can be derived In the offshore environment you might say that there are two discriminating

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FEATURE Photo Credit nightman1965 www 123RF com factors one is the situation with respect to automation a very high level of automation is becoming more and more commonplace Mishra said The second is the data that we get from offshore environments is really big data in the sense that we get lots of data we get very frequently sampled data so the challenge is how do you process this information in real time as opposed to doing it offline and make decisions with respect to the behavior of your system in the near future He said that for example a company might monitor pressure and temperatures and flow rates and seek to understand given the kind of conditions what the pressure is going to be in the next hour the next 24 hours and whether it s going to trigger some danger threshold that needs to be mitigated In terms of predictive maintenance Mishra said the organization can look at the past history of failures and near failures and correlate them with other indicators of the system with respect to pressure or temperature for example With that information it s possible to establish a trigger system so that if the system crosses X value of pressure and Y value of temperature certain equipment is likely to undergo failure because it has failed in the past under these kinds of conditions The challenges are really in how do you take this massive amount of data and then process them in a real time or near real time environment he said And after you go through the knowledge discovery part having gone through the data acquisition and management part how do you capture that learning and those insights into some sort of a decision support interface that can be used by the operator on the platform or somebody who is sitting in a control room in onshore office What s Next ABS Group s Matt Mowrer director of applied technology and data analytics says that there are many applications for business analytics coming in the near future Mowrer said that the next step beyond predictive analytics is prescriptive analytics I really see that working on the risk side where I m not just providing alarms to operators about anomalous conditions based on multiple data feeds but actually giving them the recommended action to minimize the time it takes them to make the decision and also hopefully eliminate bad decisions he said Also down the road Mowrer sees the possibilities for the development of augmented reality for operations and maintenance workers where they are in the physical environment and they have access to a virtual environment He said that from a wearable technology perspective such as Google glass operations and maintenance workers can access maintenance procedures and have an interface where they interact with equipment to minimize time spent troubleshooting or identifying tools and procedures You re seeing these things on the consumer side and I think there s some natural industrial applications for them he said Oilman Magazine March April 2017 OilmanMagazine com 21

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OILMAN COLUMN Exploring for Freedom By Mark A Stansberry In the book Fueling Freedom authors Stephen Moore and Kathleen Hartnett White explain their views by addressing the madness of the green war on abundant energy Why the idea of replacing fossil fuel energy with medieval technologies of wind solar power and biomass is a dangerous fantasy How recent technological breakthroughs have made our supply of oil and gas virtually unlimited exploding the myth of peak oil Why the cruel green agenda will keep billions of people in grinding poverty and threatens the world with massive starvation The value of the energy underneath federal lands and waters is at least 50 trillion With a pro America energy policy the U S should be energy independent by the year 2020 In my book America Needs America s Energy Creating Together the People s Energy Plan I stress similar points of view However I strongly emphasize that the book is dedicated to the proposition that we need to turn to new technologies innovation and the enduring American spirit that has enabled us to overcome every challenge this nation has faced since our founding the goal of total energy independence can be achieved before it is too late We are the ones who will have to do it because our societal institutions have proven they are not up to the task It is time to take a stand evaluate your own impact to our nation and play your part in preserving our country Energy is the future of America and America Needs America s Energy 22 It is time we come together the U S has the immediate challenge of striving for energy independence but also of providing global energy needs and security for others The Global Economic Reality America Needs America s Energy and the World needs America s Energy KnowHow The average American uses five times more energy than the average global citizen One study specifically links improvement in life expectancy educational attainment and per capita income to energy use As Chairman of worldwide operations of People to People International I led an Operation International Children mission to Haiti in 2011 Upon first arriving I met with representatives from the U S Embassy who provided me disturbing statistics about Haiti statistics from within our own hemisphere 70 of the population was unemployed 70 were illiterate life expectancy for men was 29 and for women age 30 A major concern was the lack of energy infrastructure which could dramatically change these statistics in a positive way America energy knowhow can greatly assist Therefore by the world following our lead on energy both global poverty and starvation can be greatly reduced The oil and gas industry touches our lives daily Among the petroleum based Oilman Magazine March April 2017 OilmanMagazine com Mark A Stansberry consumer products that Americans use daily include antiseptics asphalt bottles clothes computers contacts deodorant drinking cups eyeglasses plastics shampoo shoes shaving cream telephones toothbrushes trash bags tires vitamin capsules and thousands of other products There are men and women taking great care in making sure 24 7 that the consumer has the necessary energy to maintain a standard of life Energy is the future of America and America Needs America s Energy And the world is counting on us as well

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OILMAN COLUMN New Policies Aimed at Increasing Economy Energy Independence By Alex Mills Anyone who had a connection to the oil and gas industry felt the power of federal bureaucracy during the eightyears President Barack Obama governed the nation from the White House The industry however did not know the magnitude of all of the new federal regulations until House Majority Leader Kevin McCarthy of California wrote in the Washington Post that the Federal Register where all new regulations are published hit 97 110 pages in 2016 alone Washington s many agencies bureaus and departments propagate rules that weigh down businesses destroy jobs and limit American freedoms McCarthy wrote Career bureaucrats who never face the voters wield punishing authority with little to no accountability If there s a swamp in Washington this is it McCarthy said federal regulations cost the American people about 1 89 trillion every year according to the Competitive Enterprise Institute That s more than 10 of GDP or roughly 15 000 per American household he said He said the House of Representatives has a plan to strip power from the bureaucracy and give it back to the people The House already has passed the Regulations From the Executive in Need of Scrutiny REINS Act which would require congressional approval before new regulations that cost at least 100 million can become law and the Regulatory Accountability Act which would require agencies to choose the least costly option available to accomplish their goals That bill would also prohibit large rules from going into effect while they are being challenged in court Further it would end the Chevron deference a doctrine that stacks the legal system in favor of the Photo Credit filmfoto www 123RF com bureaucracy by directing judges to defer to an agency s interpretation of its own rules Also the House will begin repealing specific regulations using the Congressional Review Act which allows a majority in the House and Senate to overturn any rules finalized in the past 60 legislative days McCarthy wrote Perhaps no aspect of America s economy has been as overregulated as energy he noted in the column So the House will repeal the Interior Department s Stream Protection Rule which could destroy tens of thousands of mining jobs and put up to 64 of the country s coal reserves off limits according to the National Mining Association Likewise the Obama administration moved at the 11th hour to limit the oiland gas industry through a new methane regulation It could cost up to 1 billion by 2025 the American Petroleum Institute estimates even though the industry is already subject to the Clean Air Act and has leveraged technological advances to dramatically reduce methane emissions The additional regulation would force small and struggling operations in the West in particular to close up shop which is why it will be one of the first to go The House will also take the axe to the Securities and Exchange Commission s disclosure rule for resource extraction which adds an unreasonable compliance burden on American energy companies that isn t applied to their foreign competitors he said This rule which closely mimics a regulation already struck down by the courts would put American businesses at a competitive disadvantage President Trump delivered on a campaign promise in his first full day in the White House on Jan 23 by directing the State Department to begin a re examination of approving the Keystone XL Pipeline which will transport crude oil from Canada to the Gulf Coast He also implemented action to get the Dakota Access pipeline completed in North Dakota where protesters have blocked further construction The actions of the president and the House are clear signals that the energy and economic policies of the nation are headed in a new pro growth era designed to increase employment and bolster energy independence Alex Mills is President of the Texas Alliance of Energy Producers The opinions expressed are solely of the author Oilman Magazine March April 2017 OilmanMagazine com 23

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NEWS AT A GLANCE Dakota Access Pipeline Granted Easement By Tim McNally To the dismay of numerous protestors and outspoken opponents on Feb 7 Dakota Access LLC the firm which was constructing the Dakota Access pipeline received an easement from the U S Army Corp of Engineers to continue with the project The easement which was issued to Congress in the form of a letter from Deputy Assistant Secretary of the Army Paul Cramer will allow the company to proceed as planned and finish the final portion of the construction The pipeline has seen a rather staggered progression as the project incurred obstacles in December 2016 when growing protests swayed the federal authorities to reexamine the plans and look for alternate solutions The Department of the Army subsequently denied a final easement needed to complete the roughly 1 100 mile pipeline However with the election of President Donald Trump there was a chance that the pipeline would be enabled to reach its conclusion Indeed on Jan 24 the White House released a memorandum which contained the president s encouragement for the continuation of the pipeline s construction Following the memorandum the Army Corps in conjunction with North Dakota Sen John Hoeven issued a statement on Jan 31 regarding plans to expedite the review process needed for the easement of the project The senator had this to say regarding the Corps most recent announcement on the easement Today the Army Corps of Engineers granted the final easement required to complete the Dakota Access Pipeline project which will be equipped with the latest safeguards and technology to protect the Standing Rock Sioux and all people downstream It will make our country stronger and more secure by helping us produce and transport more domestic energy instead of importing it from the Middle East Hoeven said He added that the permitting process will be under constant review in order to ensure that all legal protocols are followed and that everyone s voice is heard 24 Not everyone involved shared the senator s positive views about the project however and some notable forms of resistance have since been taken up For instance Seattle s City Council voted to cut all ties with Wells Fargo the primary lender for the pipeline project Various groups have also promised to pursue legal action and a challenge against the pipeline has already been issued Senate Repeals SEC Transparency Rule for Oil and Gas Companies By Tim McNally A rule that was part of the Dodd Frank Wall Street Reform and Consumer Protection Act was overturned by a vote of 52 47 in the Senate The Securities and Exchange Commission s Disclosure of Payments by Resource Extraction Issuers rule required that companies interested in having access to resources abroad disclose any payments made to the governments of foreign countries The rule has been a subject of much controversy since its creation with advocates and opponents debating the pros and cons of the rule Many oil and gas companies were outspoken about their opposition to the rule and how it could potentially harm their company s operations ExxonMobil stated in February 2016 that the requirement to disclose all payments on individual contracts under the SEC s definition of Project could compromise the firm s competitive edge We believe this definition carries the maximum potential for competitive harm to companies by allowing competitors to obtain access to a company s highly sensitive and proprietary commercial information ExxonMobil VP and Controller David Rosenthal said in a letter to the SEC By analyzing multiple such contracts over time competitors may gradually be able to construct a deep overall understanding of a company s strategic approach to bidding and contracting including even a company s rate of return criteria Rosenthal continued Such concerns were ubiquitous throughout the industry although anti corruption advocates praised the rule as a step in the right direction Oilman Magazine March April 2017 OilmanMagazine com Oxfam America an international relief and development organization was one such group which highlighted the importance of the rule in their comments to the SEC Oxfam welcomes the Proposed Rule which requires public company bycompany and contract based project level disclosure We support the Commission s efforts to align the Rule with the disclosure regimes in Canada and the European Union However the subsequent overturning of this rule by the Senate did not go over well with Oxfam according to The Hill Voting to roll back basic transparency rules provides zero benefits for the public but will instead allow corrupt elites to continue to stuff their pockets with oil money and steal from their citizens said Oxfam American senior policy advisor Isabel Munilla The effects of a Republican dominated Congress and the Trump administration s initiation of business friendly policies clearly contributed to the overturning of this rule The recent announcement that the Trump administration would be enabling construction of the Keystone XL and Dakota Access pipelines in addition to the appointment of former ExxonMobil CEO Rex Tillerson to the position of Secretary of State reveals a definite trend in the objectives of the new administration O G Industry May Encounter Workforce Shortage By Tim McNally The fact that oil and gas firms have cut hundreds of thousands of jobs is nothing new The repetitive headlines detailing the thousands of jobs cut at massive multinational companies were a constant source of worry for many employed by the oil and gas industry Unfortunately these job cuts are a necessary evil in the sense that companies could not operate profitably without the drastic reduction of costs Laying off employees is one of the fastest and most effective ways of reducing expenditures However it now appears as if the extensive layoffs could have negative repercussions for the future operations of many of these businesses as they begin to ramp up operations

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NEWS AT A GLANCE As the oil price continues to ascend at its particularly low rate and the number of layoffs announced by companies continues to decrease companies will need to bring on more employees to fulfill the completion of new projects However many of the employees with the necessary skillsets to complete such projects are the same ones who were let go during tough times A report by Graves and Co released in May 2016 estimated that the total jobs lost due to the oil price crash amounted to roughly 350 000 A good number of these individuals due to their technical knowledge and skills did not have any trouble transferring their skills to careers in new industries As companies operations rebound in unison with the increasing oil price they just might find that those highly skilled employees who were relieved of their jobs are less than amicable to the idea of coming back to work for these same companies The fickle nature of the industry as a whole can be an unattractive quality for employees which might cause them to seek out more stable careers in another industry Oil Executive Confirmed for Secretary of State By Tim McNally On Feb 1 the Senate approved former Exxon Mobil chairman and CEO Rex Tillerson for the position of Secretary of State by a vote of 56 to 43 The votes were cast as expected in line with party affiliations with a few exceptions on the democratic side Heidi Heitkamp of North Dakota Joe Manchin of West Virginia and Mark Warner of Virginia were the three Democratic Senators who voted for Tillerson and they were joined by Independent Senator Angus King from Maine Warner who has a history of pushing legislation that supports the oil and gas industry said that although Tillerson was certainly not his first choice for the position I respect the fact that he has chosen at this point in his career to serve the nation he stated on his website I know that there are many people who disagree with my decision but I believe that he will bring a more experienced measured voice to an Administration that has so far struggled to demonstrate any rational approach to foreign policy he continued The New York Times noted that the 43 votes cast in opposition to Tillerson were the most against any secretary of state in history Many Senators viewed Tillerson as a controversial pick for the position due to his previous experiences and relationships During the Senate committee hearing for Tillerson on Jan 11 he faced some intense questioning concerning his business activities in Russia and his relationship with Vladimir Putin There has also been concern about Tillerson s previous experience as CEO of ExxonMobil which could be seen as being a conflict of interest when it comes to his decision making as Secretary of State President Donald Trump s picks for Cabinet include many former businessmen such as Steven Mnuchin for Treasury Secretary Gary Cohn who was chosen to lead Trumps National Economic Council and Elaine Chao for Secretary of Transportation Trump appears to be building up a business council to support his ambitious economic plans for the U S HEAR WELL P A AND DECOMMISSIONING INSIGHT DELIVERED BY May 23 24 Doubletree By Hilton Greenway Plaza Houston wv DEVELOP YOUR 2017 2018 DECOMMISSIONING STRATEGY CONSIDERING REGULATORY REQUIREMENTS NEW DEEPWATER P A TECHNOLOGY AND EMERGING COLLABORATIVE INITIATIVES REASONS TO ATTEND DDW 2017 OPERATOR CASE STUDIES Gain unparalleled insight into recent P A projects through 4 operator case studies 3 targeted panels to plan your decommissioning strategy for 2017 2018 WELL P A Tap into GOM P A execution best practice including new contracting models cost estimation methodology technology developments such as riseless coiled tubing and resins SPONSORS NEW TECHNOLOGY Access cutting edge tooling developments cement alternatives and riserless equipment in a dedicated agenda section and throughout our interactive technology showcase hall WORKSHOPS Take advantage of 3 dedicated hands on workshops including a well P A technical session a regulatory update an operator only breakfast focused on practical paths to collaboration STRUCTURE REMOVAL Discuss the future of deepwater structure removal taking into consideration initiatives such as NEBA and the Rigs to Reef program to ensure best practice is in place in the GOM Sam Scarpa Project Manager Offshore Network Ltd 713 5706 576 sscarpa offsnet com Oilman Magazine March April 2017 OilmanMagazine com 25

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OKLAHOMA NEWS AT A GLANCE Photo Credit Pan Demin www 123RF com Tulsa Company Agrees to Pay Fine to Settle EPA Charges and lasting impacts on clean water for communities By Tim McNally She added Companies need to take the necessary precautions to make sure fuel is transported safely and responsibly This settlement puts in place important pipeline safety and spill prevention measures that make this industry safer for communities Tulsa Okla based Magellan Pipeline Company L P has agreed to pay a fine of 2 million in addition to 16 million for recovery purposes to the Environmental Protection Agency EPA to settle accusations that it violated federal pollution policies The company has been under fire because it ignored certain regulations outlined in the Clean Water Act The firm s pipelines incurred four oil spills in various cities throughout the U S including Texas City Texas Nemaha Neb and El Dorado Kan Three of the spills occurred in 2011 within Nebraska and Texas Roughly 5 000 barrels of oil spilled from the company s pipeline and contaminated water sources in local areas Cynthia Giles assistant administrator for EPA s Office of Enforcement and Compliance Assurance said in a Jan 19 statement that fuel spills have real 26 The 16 million that will be set aside for recovery purposes will be used for the ongoing process of cleaning an oil spill in Nebraska developing and implementing a new training program for damage prevention staff and various other requirements which focus on the company s transparency MPLX Purchases Ozark Pipeline for 220 Million By Tim McNally Findlay Ohio based MPLX LP announced on Feb 13 that it agreed to purchase the Ozark Pipeline from Enbridge Pipelines LLC MPLX is a limited partnership that was formed by Marathon Petroleum Oilman Magazine March April 2017 OilmanMagazine com Corp in 2012 with a focus on acquiring and developing midstream energy infrastructure assets The firm agreed to pay Enbridge 220 million for the 433mile pipeline The Ozark pipeline runs from Cushing Okla to Wood River Ill and has a capacity for transporting 230 000 barrels of oil per day bpd However MPLX is looking to further expand the pipeline s capacity as evidenced by the fact that the firm sent a petition to the Federal Energy Regulatory Commission on Feb 16 in order to receive approval for such a project The planned expansion project if approved is expected to be completed in 2Q18 with enhancements consisting of increased horsepower at pump stations and added drag reducing agents for oil movement The MPLX release also notes that Enbridge recently acquired enough long term commitments to increase the capacity of the pipeline to roughly 345 000 bpd

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OKLAHOMA NEWS AT A GLANCE Ozark Pipeline will expand the footprint of our logistics and storage segment by connecting Cushing sourced volumes to our extensive Midwest pipeline network Don Templin president of MPLX said We believe MPLX is extremely wellpositioned to grow through a combination of organic projects dropdowns from our sponsor Marathon Petroleum Corporation and third party acquisitions performance for 2016 Enbridge and MPLX further announced on Feb 15 that they closed on a jointventure investment in the Bakken Pipeline system The two companies will share an indirect equity interest in the Dakota Access Pipeline and the Energy Transfer Crude Oil Pipeline projects Cash flow from operations for the year came in at 3 66 billion up from the previous year s figure of 2 68 billion Much of the increase in cash flows for the year can be attributed to the fourth quarter s impressive performance which saw cash flows of 1 58 billion up 990 million from 592 million in the fourth quarter of 2015 7th Annual Williams Reports Impressive Fourth Quarter Performance By Tim McNally On Feb 15 The Williams Companies Inc released its fourth quarter and total year The Tulsa Okla based company reported an unaudited net loss of 15 million for 4Q16 a 700 million improvement from a 4Q15 net loss of 715 million For the entire year Williams reported an unaudited net loss of 424 million a 147 million improvement over 2015 s net loss of 571 million We realized strong cash flows from operations in 2016 said Williams president and CEO Alan Armstrong Our well positioned natural gas infrastructure assets enabled us to once again organically grow fee based revenues while our disciplined approach drove lower expenses even as we brought new assets online Williams subsidiary Williams Partners managed to turn a profit for both the 4Q16 and the year as a whole The subsidiary reported an unaudited net income of 145 million for 4Q16 a significant improvement from the firm s net loss of 1 64 billion for 4Q15 For the entire year the firm reported net income of 431 million up 1 88 billion from 2015 s net loss of 1 45 billion In January we took steps to strengthen our financial position and lower our cost of capital to match up with our peer leading high quality low risk growth portfolio Armstrong said As a result Williams and Williams Partners are positioned for longterm sustainable growth 7th Annual MARCH 29 30 2017 Pittsburgh Pennsylvania E P Led Speaker Lineup Including Cost Effective Treatment Technologies And Alternative Disposal Methods To Maximize Cost Savings For Produced Water Disposal And Treatment For Recycling Reuse Jade Morel While Mitigating The Risk Of TENORM Seismicity New For 2017 E P Strategies To Comply With New Chapter 78A Regulations Superintendent Water Management Group Director Water Management EQT Corporation Thomas Bauer Ascent Resources Steve Marcil Operations Engineer Brand New Focus Areas And Practical Case Studies To Black Swan Energy Make The Decision Between Low Cost Disposal and Treatment for Reuse Burke Grove Respond To The Act78A Navigate The Process Injection Disposal Eliminate Water At A Similar Cost Of Recycling Economic TENORM Management Water Foreman Ascent Resources Raise The Bar On Produced Water Treatment Economic Water Treatments For Disposal Eddy Biehl Water Sharing Stonebridge Operating CEO Jason Frame Program Chief GOLD SPONSOR SILVER SPONSOR West Virginia Radiological Health Program CO SPONSORS Organized by www shale water marcellus utica com Oilman Magazine March April 2017 OilmanMagazine com 27

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Texas Petro Index 148 TEXAS NEWS AT A GLANCE By Karr Ingham Petroleum Economist Texas Petro Index Indicates an End to Two Year Contraction in Oil and Gas 320 0 The extreme declines in the TPI reflect the severity of the downturn in several key metrics such as crude oil and natural gas prices rig count drilling permits and job cuts In Texas crude oil prices fell from 101 68 per barrel in June 2014 to 27 08 per barrel in February 2016 a decline of 73 percent Natural gas fell from more than 4 50 per thousand cubic feet in June 2014 to 1 63 per thousand cubic feet in March 2016 a decline of 64 percent Rig count reported by Baker Hughes hit 906 the third week of November 2014 before falling to a low of 173 in May 2016 a decline of 80 percent Drilling permits granted each month exceed 3 000 in September 2014 and reached 510 in January 2016 an 83 percent decline An estimated 103 800 jobs were lost in the upstream sector between December 2014 and October 2016 By the end of 2016 every indicator that makes up the TPI had turned the corner with the exception of natural gas production and the number of oil and gas wells completed Ingham said Crude oil prices in December averaged 48 69 per barrel and the estimated crude oil production in Texas totaled about 98 5 million barrels 5 1 percent less than November 2014 313 5 300 0 bbl 100 00 260 0 240 0 50 00 0 00 200 0 180 0 Dec 2009 187 4 140 0 Texas PetroIndex 2014 2013 2012 Texas Petro Indicators in 2015 Active drilling rigs Index support great causes inTHIS theYEAR industry it OILDecember AND GAS INDICATORS BASE YEAR LAST YEAR Change averaged 310 4 3 percent fewer units than also raises awareness about them We re November 2016 November 1995November 2015November 11 16 This Year201611 15 Last Year November 2016 Base Year Change Nov 2016 Nov 2015 in December 2015 Drilling permits issued Novbeyond that Oilfield Helping Hands 1995 proud 11 15 11 16 was 1 009 Mo 38 8Average percent more than the been chosen as this Oil Price bbl has16 27 39 23 year s 42 06beneficiary 7 2 727 permits issued in December 2015 An and know this honor will have Oil Price bbl YTD Avg 16 68 46 41 39 03a positive 15 9 estimated 205 300 remained Natural Gas Price First ofTexans Month Spot Index on impact 1 64 on the lives 2 03 and wellbeing 2 38 of 17 2 upstream oil and gas payrolls about 11 6 several worthy families in need OHH Gas Price YTD Avg 1 42 2 61 2 29 12 1 percent fewer than in December 2015 President Gregory Rachal said Rig Count Month 255 339 271 20 1 Rig Count YTD Avg 251 439 230 47 5 It s been a bloodbath frankly but better On May 2 OTC will host the days are ahead in 2017 after two years Distinguished Achievement Award Drilling Permits Month 889 687 673 2 0 of sharp contraction job losses and Luncheon at the NRG Center Drilling Permits YTD 10 325 9 822 7 104in Houston 27 7 downward pressure The335 event raises776 funds for worthy Oil Completions Month on the statewide and 342 causes 55 9 regional economies of Texas Ingham recognizes industry achievements Oil Completions YTD 3 944 14 790 7 383 and 50 1 said provides an opportunity for industry Gas Completions Month 281 150 151 0 7 leaders to network with colleagues from Gas Completions YTD 3 491 2 636 2 036 22 8 Oilfield Helping Hands Named 2017 around the world Oil Production Volume 000 sDistinguished bbls month 45 237 102 273 93 744 8 3 Beneficiary of OTC Oil Production Volume 000 s bblsYTD 505 828 1 151 618 1 076 855 Achievement Award We re proud to name OHH as this 6 5 Oil Production Value 000 s Month year s 736 006beneficiary 4 011 649The event s 3 942 696Executive 1 7 By Emmanuel Advisory Board was most impressed 21 6 by Oil Production ValueSullivan 000 sYTD 8 436 564 53 445 718 41 927 201 the organization s commitment to helping Gas Production Volume 000 s MCF month 471 889 709 770 649 411 8 5 Oilfield Helping Hands OHH has families that8 078 790 have been 7 532 965 a part of our 6 8 Gas Production 000 sbeneficiary MCF YTD of the 5 222 175 been named Volume the 2017 industry and have hit hard times Joe7 3 Gas Production Value 000 sConference Month Offshore Technology OTC 773 898 1 440 833 1 545 590 Fowler OTC Board of Directors said Gas Production Value 000 s YTD Award OHH 7 452 601 21 073 726 17 222 537 18 3 Distinguished Achievement isTotal a nonprofit charitable organization Oil Gas Employment Month 131 400 234 100 205 675 12 1 established Houston Avg in YTD 2003 that Total Oil Gasin Employment 132 565 261 045 210 200 19 5 isOilcomprised of volunteers devoted to and Gas Extraction Employment Month 69 200 96 450 93 500 3 1 providing financialEmployment assistance Avg toYTD oilfield Oil and Gas Extraction 70 275 99 640 94 275 5 4 workers in financial crisis Oil and Gas Support Employment Month 62 200 137 650 112 175 18 5 Oil andOTC Gas Support Employment Avg YTD 62 290 161 405 115 925 28 2 The Distinguished Achievement TEXAS PETRO INDEX Base 100 January 1995 96 8 201 2 148 1 26 4 Awards Luncheon does more than just Oilman Magazine March April 2017 OilmanMagazine com H 6 00 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Texas Alliance of Energy Producers 1998 1996 1995 100 0 1997 120 0 N Nov 2016 148 1 Nov 1997 119 8 June 1999 83 8 2016 Aug 2001 143 0 Aug 2002 117 1 2015 160 0 80 0 75 00 25 00 220 0 Copyright 2017 by Texas Alliance of Energy Producers All rights reserved 28 125 00 October 2008 287 1 280 0 INDEX Base 100 Jan 1995 This is the moment we ve been waiting for said Karr Ingham the economist who created the TPI and updates it monthly It is good news for the industry for the Texas economy and for many communities around the state that are strongly connected to the oil and gas exploration and production industry No mmBTU By Emmanuel Sullivan Texas Petro Index TPI announced today that upstream oil and gas activity in Texas ended its 24 month long contraction in December TPI is a composite index based upon a comprehensive group of upstream economic indicators The index peaked at a record 313 5 in November 2014 and fell to 150 6 in December 2016 up from 148 0 in November C Texas Petro Index January 1995 November 2016 4 00 N 2 00 TexasT 30 000 25 000 Y 21 20 000 15 000 10 000 5 000 20 T 1200 1000 800 Ba 850 600 400 200 0 2012

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TEXAS NEWS AT A GLANCE Photo Credit doodlebugs www 123RF com He continued Specifically OHH assists families in financial crisis due to medical and other serious circumstances It works diligently to keep costs low to ensure as much money as possible can go directly toward benefitting the families To date OHH has distributed more than 3 3 million to hundreds of families across the U S Thanks to OTC we are confident that we ll be able to support even more oilfield families experiencing financial crisis Rachal said High Acreage Costs Price Out Competition in Permian By Eric R Eissler The U S most saturated shale oil play has become too saturated with companies trying to squeeze out a profit Land and asset prices are reaching for the sky and that new situation has many operators looking for greener pastures The Permian bubble continues as land prices continue to climb Acreage has climbed to 60 000 per acre and that is off putting to many companies that are trying to expand and explore for new wells According to a report by Woods Mackenzie over the past four years the current price per acre has increased 50fold leading many new entrants to mull searching for new wells outside of the Permian The supermajors such as Exxon Mobil are not going to go elsewhere to explore for oil due to all the resources already invested in the basin In fact Exxon Mobil is pouring more money into acquiring assets The supermajor announced in mid January that it was acquiring some 275 000 acres in New Mexico from the Bass family of Fort Worth for up to 6 6 billion in stock and cash The deal came on the heels of another acquisition transaction by oil producer Noble Energy which agreed to pay 2 7 billion to buy Clayton Williams Energy adding some 120 000 oil rich acres nearby in West Texas to its production land base Houston American Energy Corp announced on Feb 9 that it has completed the acquisition of a 25 percent working interest in two lease blocks covering 717 25 acres in Reeves County Texas This purchase will bring the Texas based oil company s total acreage position to approximately 800 gross acres This acquisition is one of the fewer smaller companies swimming against the current in the ever growing Permian Basin real estate bubble The Permian Basin runs 250 miles wide and 300 miles long across West Texas and southeastern New Mexico It is the hottest location for oil drillers not only because it has many more layers of oil rich stone but also because each seam is 10 or 15 times thicker than those in other shale formations such as the Bakken or Eagle Ford Essentially that translates to more oil per dollar spent but at these new prices the Permian is not the deal it once was for drilling companies Since the first well was spudded in 1921 the basin has yielded more than 29 billion barrels of oil Oilman Magazine March April 2017 OilmanMagazine com 29

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LOUISIANA NEWS AT A GLANCE Photo Credit Stanislav Komogorov www 123RF com Bayou Bridge Pipeline to Have Large Economic Benefit for Louisiana By Tim McNally The Bayou Bridge Pipeline expansion in Louisiana will have a significant economic benefit for the state according to one group s report on the matter The expansion will enable an existing crude oil pipeline to transfer multiple grades of oil from Lake Charles La to St James La The LSU Center for Energy studies commissioned the report at the behest of Energy Transfer the firm in charge of developing the pipeline to estimate the economic benefits of the project According to the report the 162 mile pipeline will require a 488 million capital investment 471 million of which will be directly tied to the state of Louisiana 30 There will be an estimated 4 000 new jobs and 400 million in wages generated by the project in 2017 The report notes that the construction phase of the pipeline s expansion is expected to produce an estimated 820 in economic benefits for Louisiana There will also be a 2 million increase in Louisiana s economic output from the annual operations of the pipeline The project is expected to increase the amount of domestic high quality crude that will reach Louisiana refineries thereby negating the need to import crude oil from foreign nations Professor David Dismukes the overseer of the report and CES executive director had this to say about the project The Bayou Bridge Pipeline will help expand Oilman Magazine March April 2017 OilmanMagazine com Louisiana s energy economy by creating jobs and leveraging existing in state energy infrastructure such as refineries processing and storage assets he said When completed the pipeline will further diversify Louisiana s crude oil supplies and provide new growth in both the immediate and long terms The economic benefits of pipelines are sometimes overlooked due to the environmental concerns which are attributed to the transportation of oil Pipelines throughout the U S have garnered quite a bit of negative attention and opposition due to worries about potential oil spills The Bayou Bridge Pipeline project is no different and many groups have been protesting the project and requesting more intensive reviews of the environmental impact of the pipeline

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LOUISIANA NEWS AT A GLANCE The project still requires the approval of several regulatory agencies such as the U S Army Corp of Engineers and the construction will not be able to proceed until then However given the recent actions and rhetoric flowing from the White House surrounding existing pipeline construction as seen in the case of the Dakota Access Pipeline it would seem likely that the plans to expand the Bayou Bridge Pipeline will be approved BHP Billiton Approves Investment in Mad Dog Phase 2 Project BHP Billiton in early February said that its board approved expenditure of 2 2 billion for its share of the development of the Mad Dog Phase 2 project off the coast of Louisiana in the Gulf of Mexico BHP Billiton holds a 23 9 percent participating interest in the Mad Dog field BP the operator holds a 60 5 percent participating interest and Union Oil Company of California an affiliate of Chevron U S A Inc holds the remaining 15 6 percent participating interest During 4Q16 BP sanctioned the Mad Dog Phase 2 project Mad Dog Phase 2 located in the Green Canyon area in the Deepwater Gulf of Mexico is a southern and southwestern extension of the existing Mad Dog field According to BHP Billiton the project includes a new floating production facility with the capacity to produce up to 140 000 gross barrels of crude oil per day from up to 14 production wells Production is expected to begin in the 2022 financial year the company said Mad Dog Phase 2 is one of the largest discovered and undeveloped resources in the Gulf of Mexico one of BHP Billiton s preferred conventional deepwater basins Steve Pastor BHP Billiton President Operations Petroleum said in a statement It offers an attractive investment opportunity for BHP Billiton and aligns with our strategic objective to build our conventional portfolio through the development of large long life highquality resources JD Covey Park Energy Purchases Assets from Chesapeake in North Louisiana By Tim McNally Dallas based Covey Park Energy on Feb 15 said that it has closed on the acquisition of assets in the Haynesville shale area in North Louisiana Covey purchased the assets from Chesapeake Exploration for 465 million Covey was able to complete the acquisition using additional equity investments from their existing investor Denham Capital The firm also received debt commitments from its core lender group in order to facilitate the purchase Covey is an independent oil and gas exploration company that was formed in 2013 with a focus on reserves within Arkansas Louisiana and Texas The firm has been purchasing assets in the Haynesville and Bossier regions for the last few months In March 2016 Covey agreed to purchase all of EP Energy Corp assets located in the Haynesville and Bossier shale regions for 420 million According to the company s website Covey is currently one of the largest acreage holders and producers in the Haynesville Bossier shales This latest move adds to the already existing assets the company owns in Louisiana The state saw a slight drop in activity as per the most recent rig count from Baker Hughes which showed that Louisiana s rig count dropped by three bringing the state s total to 51 while the nation as a whole saw an increase of 10 rigs for a total of 751 Louisiana has also been in the news recently because of the proposed Bayou Bridge Pipeline expansion A report from LSU Center for Energy Studies estimates that the construction of the pipeline will bring an 820 million economic benefit to the state but opponents worry about the potential environmentally damaging effects of the pipeline Oilman Magazine March April 2017 OilmanMagazine com 31

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OILMAN COLUMN An Interview with Casey Minshew COO EnergyFunders By Tim McNally Tim McNally Why don t you tell me a little about why EnergyFunders was founded Casey Minshew Philip Racusin CEO and Co founder of EnergyFunders had been talking with his uncle a successful oil and gas operator in Houston about how exciting and how rewarding the oil and gas industry appeared to be However when Philip learned that the required amount of capital to invest in an oilfield project was extremely high he was suddenly let down Because he is a crowd funder he has invested with Kickstarter and all these campaigns he wondered if anyone else was crowdfunding in the oil and gas industry and he couldn t find anyone else that was doing it He got together with one of his good friends Roger who is one of our advisory members and they kicked off the concept of EnergyFunders by creating this platform TM What made you decide to join the team CM The value that attracted me the most to it was that the business model of EnergyFunders was never designed to profit from the Investor So we take a carry in the fund and we work with the investor but we don t take a fee for raising money If the project is not successful no one makes money including us so we are highly incentivized to see it succeed TM How does EnergyFunders attempt to ensure a project s success from the operator side CM At EnergyFunders we try to bring our investors the best deals we possibly can Oil and gas projects have a tremendous 32 amount of risk and the last thing you need is operational risk We work with operators that know what they are doing We work with the best that is our intention TM And how do operators benefit from crowdfunding CM Smaller operators face many challenges and no one was solving those problems when oil was at 100 We really try to solve these problems for the operators and one of those is always raising capital It is the standard practice of an operator to always raise money If we can alleviate that issue of raising money we save them time energy and we save them money that they are spending trying to raise capital We bring capital and we also bring other resources such as new technology valuable relationships and reservoir engineer teams which a smaller operator typically doesn t have access to TM In what ways does this affect the investing side of the project CM The investor doesn t have the time the resources to go and do the due diligence to find these relationships They want a partner We do the due diligence to help de risk the asset because we also want a higher probability of winning With the right investment strategy we can get into projects that make more money than they cost And even if things go wrong the investor knows that we are not profiting from being wrong TM What kind of measures do you take to mitigate your risk CM One of the most critical things that we can do is to bring in a very successful and strong reservoir engineering team that helps us to evaluate the deals up front The other process is to really get to know the operator We check their track record Oilman Magazine March April 2017 OilmanMagazine com Casey Minshew COO EnergyFunders and past performance So we are not just putting up deals left and right we are putting up the right deals when they are ready to go We truly know that these deals are specialized The investor knows that we did the due diligence because every investor gets the chance to look at the numbers and all the data that we provide Then the investor can choose the project that fits best for them We want people to invest on their own due diligence TM How does this current market affect the way operators do business CM The market being where it is today allows everybody to realize that we have to be fundamentally sound on how we invest in the way we invest When oil was at 100 the truth was that promoters were over promoting and operators were overinflating their costs and this drives a vicious cycle where the last investor to the table loses At these current prices people want to make money quickly They are willing to change the way they ve done things for many years and actually get realistic An investor has to get a good yield and if an investor doesn t get a good yield consistently he s not going to keep investing

Oilman Magazine Mar/Apr 2017

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