Oilman Magazine Nov/Dec 2017 : simplebooklet.com

IN THIS ISSUE Feature For O G Environmental Concerns are Market Concerns By Samuel Cook pages 20 and 21 In Every Issue Letter from the Publisher page 2 OILMAN Contributors page 2 OILMAN Crossword Puzzle page 3 OILMAN Online Retweets Social Stream page 4 Downhole Data page 4 Product Showcase page 16 Case Study page 17 OILMAN Crossword Puzzle Answers page 17 OILMAN PRIDE Oil Derricks Huntington Beach CA 1940s page 5 OILMAN TODAY THUMS Astronaut Oil Island White Long Beach CA 1986 page 6 OILMAN COLUMNS Steve Burnett Oilman Cartoon page 3 Thomas G Ciarlone Jr The Growing Tension Between Executives and Non Executives in the Oil Patch page 7 Omar Abou Sayed The Importance of Oil and Gas Waste Management page 8 Josh Robbins Oil and Gas Acquisition Market 2018 Outlook page 9 Nick Candito Innovation In The Oil and Gas Industry The Future is Now page 10 Tara Malhotra First ever Shipment of U S Crude Oil to India Could Boost Bilateral Trade page 11 Lee Nagel Data Visualization as it Relates to the Oil and Gas Industry page 12 Eric R Eissler 5 Challenges to Navigate in 2018 and Beyond page 14 Mark A Stansberry Federal Tax Reform and the U S Energy Industry page 15 Bryan Hanks A Friend an Oilman and a Louisianan page 18 Tim McNally Interview with Dave McCarthy Senior Director of Products at Bsquare page 23 Jason Speiss Why Selling Crude Oil to China is Good for America page 32 NEWS News at a Glance pages 24 and 25 Oklahoma News pages 26 and 27 Texas News pages 28 and 29 Louisiana News pages 30 and 31 Oilman Magazine November December 2017 OilmanMagazine com 1

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LETTER FROM THE PUBLISHER The oil and gas market has seen many fluctuations over the past three years from 24 a barrel to now bouncing between 45 and 55 a barrel OPEC issuing various reports of its intention to stabilize the market several large shale plays exchanging hands in the hot Delaware Basin and major oil companies and SMBs wading through a crippling downturn to a brighter future Because of the downturn many companies had to produce revenue with less resources and innovate to increase production The bright spot in all of this has been technology The past year has brought the oil and gas market several innovative products procedures and services that have enhanced the recovery of oil and new technology that has allowed companies to increase employee productivity Several technology buzzwords that have floated around significantly just in the past six months are Internet of Things IoT Blockchain Wearable Technology and Artificial Intelligence AI However there are several key questions forming around this relatively new technology How will it be used in the industry Who will use it What are the costs and benefits OILMAN s editorial team will explore the technology and attempt to answer these questions and more in several issues next year In this issue we dive into the hot debate of protecting the environment and balancing the interest of the oil and gas market to operate successfully against federal and local regulations The team at OILMAN would like to thank you our readers advertisers and contributors for your continued support and we look forward to bringing you insightful oil and gas features in 2018 Emmanuel Sullivan Publisher OILMAN Magazine CONTRIBUTORS Biographies Don Briggs 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 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 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 Thomas G Ciarlone Jr Tom is a litigation partner in the Houston office of Kane Russell Coleman Logan PC where he serves as the head of the firm 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 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 Phil Graves Phil 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 Oilman Magazine November December 2017 OilmanMagazine com MAGAZINE NOVEMBER DECEMBER 2017 PUBLISHER Emmanuel Sullivan MANAGING EDITOR Samuel Cook FEATURE WRITER Eric Eissler NEWS EDITOR Tim McNally NEWS WRITER Tonae Hamilton Tara Malhotra GRAPHIC DESIGNER Kim Fischer CONTRIBUTORS Don Briggs Steve Burnett Thomas Ciarlone Jr Phil Graves Joshua Robbins Story Sloane III Jason Spiess Mark Stansberry SALES OilmanAdvertising com Eric Freer Wyatt Hahn To 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 2017 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 2340

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OILMAN COLUMN The Growing Tension Between Executives and Non Executives in the Oil Patch By Thomas G Ciarlone Jr The Court of Appeals in San Antonio recently decided one of the first cases in quite some time to address the duties of the party with the executive rights to minerals owed to non executive mineral interest owners The case is Texas Outfitters Limited v Nicholson No 04 16 00392 CV Most of us in the industry know that in Texas and other jurisdictions the mineral estate as distinguished from the surface is comprised of what is often referred to as a bundle of sticks There is the right to bonus money and royalty for example Interestingly and sometimes vexing is that fact that the right to receive royalties is generally a function of a mineral lease Yet the right to negotiate and enter into a lease is not part and parcel of the royalty stick in the bundle Rather the right to lease is a separate right one that can be stripped from the other sticks in the bundle and even exist entirely on its own when it is often called a naked executive right In any event just to be clear the executive right or privilege is the authority to lease oil gas and other minerals for exploration development and production As you might imagine in those instances when the executive right is separated from the monetary incidents of mineral ownership like royalties and bonus money inevitably you will encounter clashing interests between the executive rights holder and the royalty owner Clashes are often about i whether the executive should lease and if so ii when and iii on what substantive deal terms Prior to the recent Texas Outfitters opinion there were two principal decisions both out of the Texas Supreme Court that addressed the duty of the executive to the non executive The first from 2003 was In re Bass There the Court concluded that the mineral executive is not charged with a duty to affirmatively lease However in the event the executive does choose to exercise its right and signs a lease then the executive must act with the utmost fair dealing toward the non executive Almost a decade later in Lesley v Texas Veterans Land Board the Texas Supremes retreated from their previous ruling in Bass and determined this time around that the executive could in fact breach its duty to the non executive by failing to lease or by taking actions that made it virtually impossible to consummate a lease So what exactly happened in Texas Outfitters The Defendant Texas Outfitters bought a large range some 1000 acres from the Carter family The purchase price was 1 million The Carters owned half the minerals under the ranch and another family the Hindes owned the other half Critically for present purposes as part of a subsequent transaction the mineral owners conveyed to Texas Outfitters not just a small interest in the minerals a little over 4 but also the full executive rights to the entire mineral estate Texas Outfitters went on to develop a hunting business on the ranch Of course now that the Defendant had a relatively small interest in the minerals and conversely a massive interest in the surface the parties were on a collision course for conflict between i the surface owner and the owner of the executive rights Texas Outfitters and ii the super majority owners of the minerals In 2010 Texas Outfitters and the other mineral owners began receiving lucrative offers from a number of E Ps to lease and develop the minerals beneath the ranch The mineral owners not surprisingly very much wanted to lease but Texas Outfitters apparently told them that the minerals would never be leased because the company wanted to keep the surface pristine in order to ensure the vitality of the hunting business represented the total amount of bonus money the Carters would have received from the soliciting operator if Texas Outfitters had agreed to lease the minerals On appeal the Fourth Court in San Antonio issued an unequivocal affirmance relying on Thomas G Ciarlone Jr the Supreme Court s guidance from Lesley that an executive can breach its duty by refusing to lease i f the refusal is arbitrary or motivated by self interest to the non executive s detriment On this score according to the appeals court the trial judge correctly determined that by declining to lease Texas Outfitters 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 profit free of any oil and gas lease The Fourth Court was also none too happy with Texas Outfitters attempts to try to get the Carters to give up a large portion of their minerals in exchange for its consent to lease Here s what the Court had to say on this front The evidence supports an inference that Texas Outfitters refused to lease not only to protect its existing surface use but also to exact a benefit from the Carters at their expense Later Texas Outfitters tried to squeeze concessions out of the majority mineral owners in exchange for its exercise of the executive right to lease Specifically Texas Outfitters demanded that the mineral owners give up much of their interest in the oil and gas such that Texas Outfitters interest would skyrocket from 4 to 25 Finally Texas Outfitters tried to argue on appeal that the Carters knowingly contracted for a situation in which they would have no say over when and how or if their minerals would be leased The San Antonio Court of Appeals was having none of this however stating in a tongue in cheek response that it could also be said that Texas Outfitters knowingly contracted for a situation in which it would owe the Carters a fiduciary duty of utmost good faith and fair dealing if a mineral lease were offered The Carters and candidly who can blame them thumbed their noses at Texas Outfitters offer and instead filed a lawsuit against it for breach of its fiduciary duty as the executive to the non executive mineral owners After a bench trial the judge determined that that Carters claims were valid and ordered Texas Outfitters to pay them nearly 900 000 This judgement basically Tom is a litigation partner in the Houston office of Kane Russell Coleman Logan PC where he serves as the head of the firm 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 Oilman Magazine November December 2017 OilmanMagazine com 7

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OILMAN COLUMN Photo Credit qq47182080 www 123RF com The Importance of Oil and Gas Waste Management By Omar Abou Sayed Waste and water management are perennial challenges for the oil and gas industry While issues related to environmental stewardship have always been important concerns in recent years they have taken center stage The industry s recent growth fueled by an adoption of new techniques has driven a fundamental change in the industry s footprint This rapid change has necessitated an equally rapid evolution in the infrastructure needed to satisfy the environmental protection demands of oil and gas producers Production from horizontal drilling and hydraulic fracturing in shale basins is one of the most important and quickly growing sectors in oil and gas but production in these basins brings a new set of waste management challenges Projections from the U S Energy Information Administration estimate that shale gas will account for approximately 46 of the U S natural gas supply by 2035 while tight oil production from shale sites will climb to 63 of total U S crude oil and condensate production in the same period Moreover these basins often are found in more populated and environmentally sensitive locales than older more mature production which amplifies the pressure to find new innovative ways to responsibly manage the associated waste streams Associated Waste Streams Waste products are created at every stage of the oil and gas exploration and production cycle from exploration to abandonment All of these wastes have the potential to harm the environment and impact worker health if they are not properly contained managed or disposed Produced Water Also known as brine saltwater or formation water produced water is by far the largest waste stream from oil and gas exploration and production Each year the wells in the United States generate approximately 21 billion bbl barrels 1 bbl 42 U S gallons of produced water or 2 4 billion gallons a day This highly saline water can be contaminated with oil and 8 grease organic and inorganic compounds and naturally occurring radioactive materials NORM which can build up to significant levels in the sludge and scale which occurs in pipes Thus produced water is usually not treated in traditional municipal wastewater treatment plants rather it is typically injected either back into a productive oil formation to support reservoir pressure or into a dedicated disposal formation Drilling Fluids and Muds These fluids are used to aid in the drilling process They lubricate the drill bit and string and act as a coolant for the bit which heats up under the friction of drilling They also circulate to carry out the drill cuttings rock fragments and dust which are produced by the action of drilling Drilling muds are composed of base fluids which may be water diesel or synthetic fluids as well as additives which aid lubricity and viscosity to prevent the fluid from being lost in formations and to add weight and volume which helps to keep the drilling hole open Different fluids have different levels of potential toxicity to the environment generally water based fluids have the lowest impact and are thus used to drill through the shallow fresh water bearing formations When used offshore spent water based drilling fluids are often discharged into the sea while they are often land farmed ploughed into the topsoil in onshore developments The key limitations on disposal of water based muds are typically residual hydrocarbon content in the mud offshore and the chloride salt content onshore While shallow holes are typically drilled with water based muds deeper and longer wells such as those found in deepwater or in long horizontal wells in onshore shale basins however require the use of oil based muds OBMs because of the greater lubricity they provide The base fluids for these muds are usually mineral oil or diesel which carry hazardous constituents that can harm the environment if Oilman Magazine November December 2017 OilmanMagazine com not discharged to the sea or the land Because spent muds are liquids which contain a large fraction of solids they are a challenge for traditional disposal infrastructure they are too wet for the landfills that specialize in solid wastes from the oil Omar Abou Sayed and gas industry but have too many solids for the injection wells that handle the bulk of the industry s produced water Therefore significant resources are expended during drilling to recycle as much of these OBMs as possible Slurry injection is a technique first invented and put to practice by ARCO Oil and Gas to enable the disposal of decades of legacy wastes kept in surface pits at wellsites in the arctic This method adds repetitive hydraulic fracturing in a disposal well to enable the disposal of these high solids content liquid wastes As such it is a strong fit for spent drilling muds Other recent innovations have led to synthetic based muds with better performance easier recyclability and lower toxicity Cuttings When the well is being drilled rock excavated by the drill bit to create the borehole called drill cuttings are produced and carried to surface by circulated drilling mud The drill cuttings are wet with drilling fluids or muds used to circulate them to surface and as such have similar hazards to the muds One notable difference is that because the cuttings are drier to begin with than the fluid mud they are more easily sent to E P landfills Fracturing Fluid Returns As previously mentioned specially engineered fluids are used in hydraulic fracturing They are pumped at high pressure into wells to open up fractures in rock within the hydrocarbonbearing formation and to carry sand to keep those fractures open once the well is put into

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OILMAN COLUMN production This fracturing is generally done in stages and with each stage there is some amount of fracturing and formation fluid which flows back to the surface flowback or fracture fluid returns Because of the large number of fracturing stages conducted when horizontal drilling and hydraulic fracturing are used together in a well as is the case in shale basins the volume of fracturing fluid returns can be very high These fluid returns bring back chemical additives formation hydrocarbons and other contaminants and therefore must be carefully contained Most often these flowback fluids are sent to disposal wells where hydrocarbons are recovered for sale and the remaining flowback fluid is filtered and the injected into a disposal formation Resource Recovery and Recycling and Disposal of Unrecoverable Wastes The philosophy of reduce reuse and recycle before disposal is as applicable to oil and gas industry waste as it is to our own household waste This is an area where scientific advancement and innovation in new green tech have the potential to transform the way producers deal with their waste Specialist techniques such as thermal desorption osmotic filtration fluid softening and electro kinetics allow companies to extract and use or sell on valuable materials from E P waste streams Recovering valuable fractions from all types of oil and gas waste doesn t just reduce the environmental impact of drilling and fracturing It also opens up valuable new revenue streams in many cases offsetting the economic cost of meeting and exceeding regulatory standards for environmental protection Once all of the useful materials have been recovered the remaining unusable waste must still be disposed of in a way that doesn t put the environment to risk Over the years a variety of waste disposal options have been used discharging liquids into the ocean and dealing with solid wastes through surface impoundment land application or land filling Each method has its own pros and cons associated costs and ease of implementation This is another place where technological innovation and green thinking have opened up new opportunities for producers More sophisticated waste management techniques such as slurry injection can offer an all in one solution for dealing with the full spectrum of gas and oilfield waste which is both economically and environmentally sound As we move deeper into the age of shale production regulatory agencies the scientific community and industry leaders recognize that significant steps must be taken to ensure that the quest for energy resources is managed responsibly with a focus on the health of the environment Legislation and regulation of waste from the sector are developing rapidly and the requirements from state to state can vary enormously in scope and detail Keeping up can be a challenge in an industry which moves at speed For producers who are attempting to fulfill their social responsibility and regulatory obligations while maintaining a profitable position investing in future proofed waste management technology is a smart move Omar Abou Sayed received his Bachelor of Science degree in Mechanical Engineering from the University of Texas at Austin and his MBA from the Harvard Business School Omar s leadership experience spans the global energy chemicals oilfield services and renewables industries He is the founder and CEO of Advantek Waste Management Services an oilfield waste management startup dedicated to preserving the environment for future generations OILMAN COLUMN Oil and Gas Acquisition Market 2018 Outlook By Josh Robbins 2017 has been a positional build year as we had expected As deals slowed down dollars were reallocated to development projects As the calendar rolled into 4Q17 many companies are still looking for deals But unless companies are overpaying for Delaware Basin assets or buying clearance priced wells deals are very difficult to find The acquisitions and divestitures market will be heavily focused on natural gas deals in 2018 especially if the trend toward 4 continues and bolt on positional blocks and trades The majority of the large dollar deals will continue to be spent on the midstream assets that help build on the long term strategies of specific acreage positions The focus will continue to be in the Delaware however the midstream companies will start to really battle for MCF D and in 2018 the operator will finally start to see some relief on an operational standpoint because of the competition Because of this cost savings wells that were in the red in 2017 may be in the black in 2018 and become better acquisition targets If oil continues to rise and is able to stabilize at 55 65 in 2018 we expect companies will look to immediately clean their portfolio of assets not defined as core Expect 1Q18 and 3Q18 to be filled with a number of smaller deals that help core up these companies as NAPE and Summer NAPE will push these deals into the spotlight We expect a significant amount of new prospects to emerge in the Permian Eagleford and Niobrara that will place focus on expanding the current borders outward In 2017 we saw companies move from a diversification of assets to operational efficiency If a company cannot operate efficiently they looked to divest In 2018 we will see these companies put these deals to market at a transaction friendly price Many private equity backed companies will look to exit in 4Q18 and 1Q19 if prices are 65 a barrel 4 MCF Drilling will start to be more and more of a topic as leases taken in 2015 start to expire Available labor force timing of drill rigs operational costs will all be taken into consideration in 2018 as flipping acreage may be the only option for some companies that can t get to every acre with a commitment We expect 2018 to Josh Robbins be a banner year Operationally the cost to drill has come down significantly The STACK SCOOP MERGE area in Oklahoma is continuing to prove successful Delaware acreage is becoming harder to find causing operators to flip what they have to block their positions as is This will increase the drilling in New Mexico significantly in 2018 Permian has cooled and development will continue to be the focus not acquisitions Oilman Magazine November December 2017 OilmanMagazine com 9

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OILMAN COLUMN Innovation In The Oil and Gas Industry The Future is Now By Nick Candito Over the past several years the oil and gas industry has struggled with diminishing demand evolving regulations political uncertainty and even natural disasters All of the above has forced companies inside the industry to adopt new strategies to sustain profits Many of course are looking to cut costs in the areas of production and delivery But innovations in process management and communications are enabling companies to increase their efficiency and even boost their bottom line Among these innovations two stand out as being the most effective and sea changing going paperless and data mobility Breaking Free of Paperwork As in other large well established industries such as healthcare and banking the shift to go paperless in the oil and gas industry has been slow but steady while the benefits of embracing digital technology have become increasingly significant Companies continuing to rely on processes that require extensive amounts of paperwork are often unable to compete in an industry experiencing rapid changes and shrinking profit margins From general operations including human resources management and accounting to industry specific tasks such as recording drilling measurements or maintaining safety records the need to digitize files reports and data has never been greater In fact process automation and having a digitally connected workforce are now necessary to meet many of the regulatory requirements mandated by law each siloed system and come up with potentially conflicting insights This left operations with siloed guesswork and made it nearly impossible for operators engineers and managers to make knowledgeable tailored goal oriented decisions Over the last 10 years companies have spent billions of dollars implementing enterprisewide systems but these systems don t speak with each other and companies aren t receiving value out of their investments What companies should be investing in is software that delivers consistent trustworthy data and insights across the entire organization from corporate to the field which allows them to boost production and optimize capital and operational expenditures A system that integrates and un siloes data helps on many different levels including Omnichannel communication so that exploration drilling distribution and production divisions can seamlessly and transparently communicate with vendors sales teams partners the corporate office and of course customers Streamlining of operations via real time visibility into activities at the local level and the elimination of guesswork Health and safety professionals working in refineries can cut more than 30 hours per month by managing safety and inspection audits in an electronic format Supply chain efficiency via real time communication so that suppliers and contractors can be better utilized across work streams and communicate with context Oil and gas companies that are lagging in going digital are now feeling the impact by not being able to maintain efficient and compliant operations This is leading some companies to move to a centralized platform to align processes and people foster collaboration and transparency and ensure greater consistency among divisions A unified approach simplifies reporting and makes information available anywhere and at any time Data Mobility Back in the boom times oil and gas companies didn t have to really dig into the data and scrutinize the numbers They grew rapidly and purchased different technology systems for each department and function However as the data started rolling in companies began to hire analysts to research 10 Oilman Magazine November December 2017 OilmanMagazine com Thanks to the latest technological advancements we are now poised for a second digital age that will slash costs unleash unparalleled productivity and skyrocket performance but only if executives can harness the right technologies to support their business strategy Nick Candito What s Next Innovation has always been a part of the oil and gas industry But while there s undoubtedly a need to continually improve extraction and production processes there s also a continual need to rethink operational process and use new technologies that boost operational efforts Today this means focusing on digital solutions that connect people and streamline processes With the current oil and gas market companies need to reinvent themselves to improve productivity While capital expenditures or acquisitions might give executives pause investing in digital technologies is a no regrets move it boosts productions from existing operations and revolutionizes operational frameworks Nick Candito is Co Founder and Chief Executive Officer at Progressly championing the company s mission towards helping customers transform the way they do business

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OILMAN COLUMN First ever Shipment of U S Crude Oil to India Could Boost Bilateral Trade By Tara Malhotra On October 02 2017 when the nation was celebrating the 148th birth anniversary of Mahatma Gandhi a cargo of 1 6 million barrels of U S crude oil was received at Paradip port in Eastern State of Odisha This marked India s first import of American crude oil Since 2014 the rise of shale oil production in the United States coupled with the economic downturn in the U S and Europe and also due to reduced imports by China created sufficient opportunity for surplus crude oil in the global market forward to expanding our cooperation with India in this area in my consular district of Odisha Andhra Pradesh and Telangana our partnerships with various stakeholders on clean energy projects will continue to strengthen stated Consul General Hadda The successful delivery of American crude oil loaded on MT New Prosperity a ship with a capacity to haul 2 million barrels of crude reaffirmed the energy commitment between India and the United States that includes importing American liquefied natural gas LNG Market experts say that on the one hand the shale revolution has turned the United States into a big producer of oil whereas the decision by OPEC countries to cut production brought a dramatic plunge in global oil prices This scenario helped the United States emerge as an exporter of crude oil and LNG U S crude has become attractive for Indian refiners after the differential between Brent the benchmark crude or marker crude that serves as a reference price for buyers in the western world and Dubai a benchmark for countries in the east narrowed The shipment was loaded at the Saint James Louisiana and Freeport Texas terminals and was received in Odisha The importance of the occasion was underscored by the presence of senior Indian and U S officials at the port including United States Consul General to Hyderabad Katherine Hadda Joint Secretary for International Cooperation from the Ministry for Petroleum and Natural Gas Sunjay Sudhir and Joint Secretary Americas Division from the Ministry of External Affairs Munu Mahawar The United States is now a big crude exporter as the Energy Information Administration EIA figures suggest that U S exports in the first three months of 2017 exceeded those of five of the 14 members of the OPEC countries This is one of the first shipments of crude oil to India after over four decades since the United States stopped oil exports in 1975 Historically the United States officially banned oil exports in 1975 in reaction to spiking global oil prices driven by the Organization of the Petroleum Exporting Countries OPEC The ban came two years after an OPEC oil embargo that banned oil sales to the U S sent gas prices skyrocketing However on December 18 2015 the U S Congress voted to lift the 40 year old export ban India s largest refiner Indian Oil Corporation Limited IOCL will process this crude at its refineries at Paradip Haldia Barauni and Bongaigaon IOCL in early July this year booked the first U S cargo opening floodgates that saw other stateowned refiners which include Bharat Petroleum Corp Ltd BPCL and Hindustan Petroleum Corp Ltd HPCL rush to buy American crude oil BPCL and HPCL have also placed orders for about 3 95 million barrels of U S crude for their Kochi and Vizag refineries The IOCL deal came within weeks of Indian Prime Minister Narendra Modi s June 2017 visit to the U S when President Donald Trump talked of his country looking to export more energy products to India During their June 26 2017 meeting in Washington U S President Trump and Indian Prime Minister Modi committed to expanding and elevating bilateral energy cooperation through a strategic energy partnership While diversifying its strategy on imports of petroleum products the Indian federal government also encouraged state controlled refiners which include IOC BPCL and HPCL to buy U S and Canadian crude from the U S Gulf coast as it looks at cheaper alternatives that have emerged due to global supply glut Oil prices has also played a vital role to lure India and other Asian countries to buy American crude oil and LNG After the shale oil revolution oil prices came down from 100 b in 2014 to 60 barrel in June 2015 and hit a low of 26 55 b in January 2016 Lower prices remain a contributing factor that helped the United States to emerge as a major crude exporter It is believed that oil prices will average between 50 b to 54 b in 2018 indicating American crude exports may increase in the coming years Industry experts and officials from both countries the U S and India believe that U S crude oil shipments to India have the potential to boost bilateral trade by up to 2 billion Indian companies including public and private sector have invested about 5 billion in U S shale assets MaryKay Carlson Charg d Affaires at the U S Embassy in New Delhi said This event marks a significant milestone in the growing partnership between the United States and India The United States and India are elevating our cooperation in the field of energy including plans for cleaner fossil fuels renewables nuclear and cutting edge storage and energy efficiency technologies We look forward to working together on further sales of U S crude and exploring opportunities to expand the role of natural gas in India Energy and energy security are pillars of any strong economy The United States looks U S energy secretary Rick Perry is of the view that the export of American crude oil to India is beneficial for both the countries and to could further expand the strategic energy partnership This event represents the growing and important strategic energy partnership between the U S and India and I look forward to exploring new opportunities to expand the role of reliable responsible and efficient energy sources with our allies Perry said in Washington on Thursday October 05 2017 Perry said the export of U S crude oil to India will create jobs economic stability and help national security in both countries Following Prime Minister Narendra Modi s visit to the U S Indian companies ramped up purchases of American crude To encourage U S crude purchases the Indian government has allowed refiners to use a foreign rather than an Indianowned vessel for the purchase It may be noted that the Indian shipping ministry has allowed the IOCL to import one parcel or cargo of crude oil from the U S every month in foreign ships Tom Vajda office director for the India Desk in the South and Central Asia Bureau of the State Department said We expect this first shipment of crude oil will be followed by many more The Shale Revolution refers to the combination of hydraulic fracturing and horizontal drilling that enabled the United States to significantly increase its production of oil and natural gas particularly from tight oil formations which now account for 36 of total U S crude oil production Currently India imports more than 82 of crude oil for its domestic needs Until recently the bulk of the India s crude imports about 62 was coming from Saudi Arabia and other middle eastern countries like Iran Iraq and Kuwait However the United States and Australia has now emerged as new crude oil and LNG suppliers to India Oilman Magazine November December 2017 OilmanMagazine com 11

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OILMAN COLUMN Data Visualization As It Relates To The Oil And Gas Industry By Lee Nagel The dynamics involved in the oil and gas industry are broad With the world changing every day there is a need to have a data harmonization mechanism that is modern and focused on solving the problems that emerge in the industry There is the need to send communication swiftly across various platforms Due to the uniqueness of the platforms used data visualization methods have improved and shifted across various conventions to allow for a smooth flow of vital data sets There is increased upstream capital investment in the oil and gas industry and for this simple reason using traditional data visualization methods is no longer viable With data visualization in place investors are able to optimize production and maximize assets without compromising on safety The access to instant images offered in data visualization provides information in an exciting way that allows you to convey the core of your knowledge Tapping into important data then converting it into awesome images helps to highlight priorities while offering meaningful information that is helpful when it comes to decision making or building momentum for projects Predictive Actions for Rising Energy Demands The broad wave of information the oil and gas industry is experiencing can be compared to talking machines Before the data gets to your desk it s optimized and refined as well as supplemented with facts that are useful in decision making Basically data visualization come in as an overload of information and the best part is that it s timed correctly to help you perfectly deal with your issues All actions are scheduled precisely to allow for easy reviews and offer detailed reports that come in handy when taking action based on the way the market shifts with changes in policies prices and time When the oil and gas industry relies on visualizations there is smooth transmission of visual analytics in a bid to allow the honing of insights Immediate access is necessary to eliminate the bottlenecks that make customer service a huge nightmare Some insights data can offer predictive measures that experts can utilize to prepare for things to come later in the market This is a great form of defense ensuring that possible losses that would have been incurred are curbed before they happen Additionally getting insights right about the future might mean preparing adequately to tap profits 12 Get Rid of Data Lag It has been the order in the oil and gas industry to find data is delayed due to lag times And this in a business perspective is a risky observation as there is high likelihood the lag time also delays decision making thereby making it uncertain to know when the perfect moment to take action is But with new technologies like data visualization that offer timely reports and in a simplified manner it has come as a major benefit to many who rely on data visualization to pursue key decisions in the industry Experts have shown that companies that run successful analytics programs are always ahead of their competition Getting data visualizations and analytics for the oil and gas industry is one of the ways to get rid of losses while spurring growth in profits Data visualizations in the oil and gas industry ensure you receive insights across a wide spectrum and your priorities are communicated effectively You could also be more forward thinking and accountable by getting the right data on time Businesses that use data visualization are five times faster at making decisions that pertain to changes in the market and this means staying ahead or on par with competition Address Risk Management Managing risks is also a key duty that every business has to pursue to emerge triumphant in every competitive market Risk compliance is at the helm of the oil and gas industry and accommodating the various needs to deal with risks is one major challenge that investors have to encounter But this becomes easy when data visualization mechanisms are embraced to deal with risks especially when these risks are about the future and changes thought to take place later It is a perfect way to prepare investors to deal with a problem as the data gives a detailed insight about things that might come into play to affect the position of the market at some point in time Businesses running in the world of today need to have ways to access strong and quality information about their performance and the market in a timely manner and with utmost clarity Data visualizations have come as a great way to access such information and the oil and gas industry has benefited largely Oilman Magazine November December 2017 OilmanMagazine com from this This allows for easy monitoring of issues so one can address them seamlessly by embracing preventive measures Through data visualization you can clarify cost and Lee Nagel profitability and with a comprehensive understanding of these parameters making a prudent decision remains a simple task Streamline Views for Different BI Needs Historically the intensity of data has overcome the scope of business intelligence BI Noting that in the midst of this data is value finding the right data in time and sending communication to people who need it is a cumbersome process that should not be pursued manually Most importantly after data is found it should be refined and translated in a manner that people can understand But in many cases few get the courage to read through the volumes of columns and fields holding data Having a simpler way to give this information has always been necessary The oil and gas industry is one of the areas where data is shared with a lot of calculations and values which many people cannot translate easily That is why data visualization has come in handy in helping investors access the right information on time This piece was obtained through support from various experts including Lee Nagel who works with Izenda as the head of marketing planning and operational execution He leads the global marketing initiatives of the company and his vast experience in entrepreneurship has seen him work with many emerging and fortune 500 companies to help them rise to higher profitability

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OILMAN COLUMN Photo Credit Galina Peshkova www 123RF com 5 Challenges to Navigate in 2018 and Beyond By Eric R Eissler Optimistic but cautious That statement sums up the outlook from the top level leaders of the U S oil and gas industry after several years of unexpected low prices Many companies managed to weather the storm others were acquired in corporate buyouts and the unlucky ones had to sadly close their doors That being said the industry is standing steady with an optimistic outlook but operating on a look before you leap strategy If you are an oil and gas executive here are five challenges that will be essential in steering your company through 2018 and beyond Be prepared to face structural and cultural issues internally many companies after letting go of more than 400 000 employees do not have the talent organizational framework systems processes or attitudes to be innovative in a dynamic and uncertain 14 marketplace Companies must be prepared to pursue new drilling and extraction technologies and to increase funding research into sustainability and clean energy Oil and gas companies need to diversify their energy sources if they want to remain relevant in the future and in alternative energies growth and to be able to vie for a significant market share 1 Differentiated Capabilities The oil and gas industry operates in diverse and hostile environments including onshore and offshore unconventional reservoir production and exploration in hot and cold challenging and remote environments Directional drilling through unconventional shale plays has also become increasingly difficult to extract all potential reserves Although the super majors and majors have tried to work in all types of oil and gas fields Oilman Magazine November December 2017 OilmanMagazine com these companies do not have the skills to compete in all types of environments Smaller drilling and oilfield services companies are leading the way in this niche market thus leading to more and more collaboration and cooperation 2 New Business Models and Partnerships The ever changing dynamic of the hydrocarbons industry from being dominated by large one stop shop companies to an industry that features specialist companies in narrower niches of the operating environment will require firms to establish new ways to work together and include ways that focus on the specific skill sets of each company Looking towards the future the model of a sole integrated company discovering and developing a field and operating it until it is depleted is being

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OILMAN COLUMN phased out New partnerships intercompany cooperation and changes in ownership are designed to ensure that the company most able to extract the value manages the field through the most relevant stages of its operating life 3 Sustainable Profitability The extended oil price slump has shown the importance for companies to have backup plans to maintain profitability during different pricing circumstances The shock of low prices and the strong possibility that interest rates will rise in the near future increasing the cost of debt has elevated free cash flow from earnings to priority status Companies must think strategically and from new perspectives to protect themselves from price dips and future rising interest rates 4 Recruiting and Retaining Talent The toll on human resources within the oil and gas industry has been heavy It has led to a lot of the best talent finding itself on the outside of the industry with a small chance of getting back in or not wanting to return at all due to the cyclical nature of the industry Many younger workers balk at employment in oil and gas because they know they can easily lose their job during a price downturn This has put pressure on hiring managers to find the right talent at the right price To recruit new young workers hiring managers must keep in mind that the younger employees are searching for less traditional workplaces they are seeking more collaboration and open communication and less top down decisionmaking With this information managers must work to bring about corporate change to become more attractive to make the work environment more appealing to the new generation of workers 5 New Technology performance and increasing their profit margin Digitization should drive the innovation that improves productivity and efficiency in the field For example robots automation and machine learning are becoming more common in the oil and gas industry handling complex and repetitive tasks such as connecting pipes assisting in directional drilling and maintaining equipment In turn all of these technological advancements will reduce labor requirements thus increasing profitability However these will require the right implementation and gradual deployment to ensure success Off to the Future Overall the leaders of America s oil and gas companies will face many challenges on the climb back to the top They will need to have the foresight and strategic insight to be able to overcome and rise to success Companies will need to assess the role that digital technologies can play in improving their OILMAN COLUMN Federal Tax Reform and The U S Energy Industry By Mark A Stansberry As I arrived in Washington D C on September 27th I knew what the subject for my next column should be federal tax reform and the U S energy industry That same day the Republicans unveiled their blueprint for tax reform The dialogue had begun The first question on my mind How is tax reform going to impact my home state of Oklahoma and the U S energy industry overall It was evident that during my recent visit to Washington DC and even as I write this column that the Trump Administration and Congressional Republicans are laserfocused on implementing tax reform The last time there was major comprehensive tax reform in the U S was in 1986 during the Reagan administration I testified during that time before the U S Senate Energy and Natural Resources Committee about the implications of tax reform to the oil and gas industry There is no question that pro growth tax reform is needed Developing a more competitive and fair tax system will support more investments and more jobs The U S has one of the highest corporate tax rates in the world The Administration has called for American energy dominance With the right kind of tax structure in place America can reach that goal Under the proposed plan the corporate tax rate will drop to 20 from 35 as one example of reform In the U S corporate taxpayers have the ability to recover costs and be taxed only on net income These provisions tax expenditures are not subsidies Cost recovery such as the depletion allowance and intangible drilling costs are not subsidies but incentives to sustain a strong energy industry which supports sustained oil and natural gas exploration and production activity According to a recent Wall Street Journal editorial Overall the GOP has produced a tax reform outline that can revitalize a weak economic expansion lead to more new business creation enhance worker productivity and lift wages Economic expansion new business creation work productivity and increased wages are what the energy industry needs now By turning to new technologies innovation and the enduring American spirit that has enabled us to overcome challenges this nation has faced the goal of a job growth tax plan is essential in the U S energy industry It is time for us to evaluate our energy future Future generations are depending on us to keep the American dream alive In a recent op ed in Investor s Business Daily Barry Russell Independent Mark A Stansberry Petroleum Association of America CEO and President sums it up As Washington D C looks to tackle reforming the tax code the critical role of American energy production cannot be overlooked Tax reform needs to move in the direction of strengthening businesses of many shapes and sizes putting our economy on a track for success and creating new jobs and opportunities along the way for our workforce What do you think It is time for National Energy Talk www nationalenergytalk com Oilman Magazine November December 2017 OilmanMagazine com 15

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PRODUCT SHOWCASE Spectra Logic Spectra Logic designed and built the Spectra T950 tape library to meet the stringent requirements of the enterprise for data integrity data security and high reliability The T950 tape library reduces staff involvement significantly affordably scales in throughput and capacity and supports multiple generations of content and future tape formats data ranging from reservoir metrics machinery and personnel performance to oil flow rates and pressures That data must be accessible to multiple users within the organization at a moment s notice To gain and keep a competitive advantage within the industry these companies must deploy backup and archive solutions capable of increasing capacity and performance For data archive backup and recovery this elite library leads the field in innovation from the greatest storage density to proactive media management the T950 always protects data in industries like oil and gas media and entertainment bioinformatics general IT and more When Slovnaft became partners with the MOL Group the conglomerate s business objectives for the data center were to update their tape drive technology and expand their library s capacity They were in search of a cost effective solution capable of consolidating their footprint making it easier for associates to manage Slovnaft decided to replace their two Oracle libraries with a Spectra Logic singleframe tape library The Spectra T950 helped Companies within the oil and gas industry often produce and record massive amounts of Slovnaft achieve their goal of having a reliable speedy and consolidated data solution that can easily scale to meet the business future requirements With this solution they need only add additional frames or partitions to increase capacity when needed The T950 s versatility was a key selling point for Slovnaft Spectra Logic provided Slovnaft with an affordable enterprise level platform to manage their data storage needs About Spectra Logic Spectra Logic develops data storage solutions that solve the problem of short and long term digital preservation for business and technology professionals dealing with exponential data growth Dedicated solely to storage innovation for nearly 40 years Spectra Logic s uncompromising product and customer focus is proven by the adoption of its solutions by industry leaders in multiple vertical markets globally To learn more visit www SpectraLogic com EFFICIENCY ACCURACY SAFETY AUTOMATED Whether using Spotter the Customizable Inspection App or a fully custom digital solution built to suit your business needs consider your company s biggests threats a thing of the past WHAT WE OFFER MOBILE APPLICATIONS CUSTOM SOFTWARE DIGITAL MARKETING DIGITAL WEB PRESENCE ONLINE REPUTATION SERVICES ENVOC COM ENERGY 16 Oilman Magazine November December 2017 OilmanMagazine com

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CASE STUDY Preventing Condensate System Fouling By U S Water Due to product scale and buildup a midstream Natural Gas Liquids NGL plant was changing their filters every three days as well as conducting heat exchanger cleanings eight times a year This redundant maintenance was costing the plant approximately 206 000 a year While conducting a plant survey U S Water representatives recommended a new solution to resolve their perpetual issue This unique NGL plant processes offspec product for operators throughout the country Dealing with the containments and debris from the off spec product propelled excessive filter plugging exchanger fouling and cleanings If the plant did not change the filters regularly or conduct exchanger cleaning the debris could foul the condensate stabilizer and result in additional unscheduled plant downtime After conducting on site debris testing U S Water s Energy team recommended a proprietary chemical additive formulated to dissolve and inhibit iron scales to be used upstream of process equipment Integrated automation equipment and engineering testing were implemented to deliver and monitor the treatment program as trucks were being offloaded by monitoring Differential Pressure DP across the filter housings and heat exchanger Since the plant introduced U S Water s solution into their system the existing pipeline build up began to detach and fluidize Filter changes have reduced from every three days to every six weeks saving the plant 157 000 annually The heat exchanger cleanings have also been reduced as the unit has not yet required any cleanings saving the plant approximately 38 400 The plant s total ROI to implement the U S Water solution is 350 Engineered services include deposition monitoring pitting corrosion total suspended solids bacteria testing System Achievements Plant efficiency increased now that personnel are no longer conducting redundant filter changes U S Water unique chemistry combined with automation and monitoring allowed the plant to get and keep their system clean Plant saved approximately 195 400 annually in costly filter changes and heat exchanger cleanings U S Water s solution ROI is approximately 350 with a two month payback deposit analysis OILMAN CROSSWORD PUZZLE ANSWERS Across 1 Production _____ 4 ____ Hughes a GE company 7 Come up for ____ 8 Cycle 9 Structure for drilling 10 Pull another vehicle 12 Department of ____ 15 Not damaged 16 Inert gas symbol 17 Santa s helper 18 _____ inhibitor 21 Drilling ____ 23 Freakish 26 Strategic alliance in an economic activity taken on together abbr 27 Anticipate 2 words 28 Natural ____ 30 Antiquated 31 Boston s state 32 National Ground Water ____ for short 34 Hot springs 35 Laughter on the internet abbr 36 Environmental watchdog for short 37 Coalbed ____ Down 1 ___ the well 2 Marcellus ____ 3 Compass direction 4 Existing onshore or offshore facility ____ 5 Indian curry dish 6 Mineral ____ 7 Clean Water ___ 11 Painter s medium 12 Physical ___ 13 Maine to the US direction abbr 14 Brazilian city 17 Long long time 18 Music holder 19 Accelerate 20 ___ negotiable 22 Land of opportunity 24 Eminent ____ 25 CSI evidence 27 Cessna e g 28 Clean ____ 29 Day after Christmas event 33 Diver s milieu 34 Pipe down Oilman Magazine November December 2017 OilmanMagazine com 17

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OILMAN COLUMN A Friend an Oilman and a Louisianan By Bryan Hanks Every 2 years the Louisiana Gulf Coast Oil Exposition LAGCOE gives a ceremonial golden hardhat The recipient of this award is named the LAGCOE Looey Originally a Looey was your average Joe who worked in the oilfield the guy that has everyone on the rig cracking up stealing your lunch using your tools and from time to time stealing your bed While many LAGCOE Looeys still maintain this same sense of humor the meaning of Looey has evolved over the years Supreme Court over a landmark case in order to protect the oil and gas industry from being taken advantage of when it came to dealing with contingency contracts with the state The oil and gas industry would come out victorious in the courts and the law was changed to what it is today Under Don s leadership LOGA has and is continually leading the charge to squash frivolous legacy and coastal lawsuits that are causing major investments to be diverted outside of Louisiana LAGCOE announced on August 9th that the 2017 Looey is none other than my friend and President of the Louisiana Oil and Gas Association Don Briggs Don and I became quick friends as he started the Louisiana Independent Oil and Gas Association LIOGA in 1992 LIOGA would eventually change its name to what we know today as LOGA I currently serve as Chairman of the Board for what I thought was only going to be a 2 year term but I am now working on my 6th year as Chairman There are many groups within the state government that we have Don to thank for He is responsible for starting the Oilfield Restoration Site Commission that is tasked with addressing the ongoing issues with orphaned well sites across the state With this commission and the Orphaned Well Program that he established there have been over 2300 orphaned wells plugged in Louisiana He has also worked with the legislature and other state leaders to pass numerous pieces of legislation that ensure the success of the oil and gas industry Don is proud of being three things an American a Christian and an oilman As an oilman Don is passionate about the oil and gas sector and willing to do whatever it takes to protect our industry He took Louisiana s own sitting Attorney General to the Louisiana 18 Over my 6 years of serving as Chairman and the 25 years of friendship I have learned a lot about this year s Looey If you ask Don about his purpose in life he will tell you that we are here to love our fellow man and to help those Oilman Magazine November December 2017 OilmanMagazine com Don Briggs Bryan Hanks in need He not only has done that for our industry but also for our state When Katrina hit he worked to raise over a million dollars to help those whose lives were destroyed During the 2016 flooding in south Louisiana LOGA raised tens of thousands of dollars to help those in need There are very few who are as deserving of the golden hardhat but Don is certainly one of them While the future of oil and gas might seem turbulent I am proud to have someone passionate about the industry fighting for the hardworking men and women in our realm as well as for the people of Louisiana Bryan Hanks is the Chairman of the LOGA Board of Directors and CEO and President of Beta Land Services

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FEATURE Photo Credit alphaspirit www 123RF com For O G Environmental Concerns Are Market Concerns By Samuel Cook From March 14 1910 to September 10 1911 millions of gallons of oil gushed out of a pressurized well in Kern County California Known as the Lakeview Gusher over the course of 18 months approximately 9 million gallons of oil poured out of the MidwaySunset Oil Field in what is still the largest oil spill in U S history Over the next century the American oil and gas industry continued its feverish growth to supply an increasingly energy hungry country Oil spills of varying sizes and environmental impacts proceeded to give one black eye after another to an industry that had effectively drilled itself into an essential spot in the American infrastructure and economy 20 Nevertheless over a century after the Lakeview Gusher dried up the amount of oil that spilled out into the environment due to drilling activities has never been surpassed While other notable disasters have long since supplanted the Gusher in cultural references more notably Exxon Valdez and more recently Deepwater Horizon the reality is that while oil spills may be more frequent due to increased drilling and a massive network of oil pipelines crisscrossing the entire U S spills also much smaller with a steadily decreasing environmental impact and even faster cleanups Fast Facts in U S Oil Spills A Downward Trend Oilman Magazine November December 2017 OilmanMagazine com Oil and gas production in the U S is currently at an all time high A July 2016 CNN report even noted that President Barack Obama presided over the largest oil boom in U S history revealing that by the end of 2015 the U S was pumping more oil than it had been in the previous 44 years This upward trend did not happen overnight but consequently followed almost immediately after the 2008 financial crisis Common wisdom would likely suggest that with the increase in U S oil production oil spills should be on an upward trend And indeed there is some truth to that If one considers the number of events over the amount of oil spilled the number of spills is

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FEATURE far greater than it was in the first 50 years of oil drilling and exploration Data from the International Tanker Owners Pollution Federation ITOPF corroborates this fact as well Taking only oil tanker incidents into account one study by Max Roser and published on online in Our World in Data shows that the number of oil spills per year has consistently been fewer than 10 per year since 2008 The data also shows that despite a large upswing in shipping activity the amount of oil spilled has sharply decreased particularly since 2008 The NOAA Office of Response and Restoration corroborates that fact as well On its site NOAA states In ITOPF s list of the top 20 tanker accidents 19 occurred before 1990 or preExxon Valdez Since then many oil pollution prevention rules have been put in place and ship navigation tools have been improved One notable example being the phase out of singlehull tankers Across the oil industry the response to environmental concerns has not been one of unresponsiveness but of quick response and adaptation Since 1910 the amount of U S oil spilled into the environment from all sources has steadily decreased Even when one takes into account the two most substantial outliers the Lakeview Gusher and the Deepwater Horizon incidents the downward trend continues Why do we see an average decrease in the environmental impact from oil drilling It s a complicated mixture of market concerns ecological concerns better technology and government regulations All of these are changes welcomed by an oil industry that has for quite some time readily adopted both technological innovations and common sense regulations that help the industry produce more energy more efficiently and with as minimal an environmental footprint as possible Oil Spills Are Costly for Everyone There s a somewhat apparent economic factor at play when it comes to oil companies and environmental concerns Damaging the environment with poor business practices is expensive Oil spills result in lost revenue as well as costly cleanups A 1999 report delivered to the International Oil Spill Conference Estimating Cleanup Costs for Oil Spills Etkin et al revealed that the average oil spill cost per tonne was 73 156 90 Estimating cost itself includes a complex web of considerations including geographical location season spill amount regulations liability compensations and more The cost to a company is high and extends beyond just the loss amount for the product which can be low in comparison to other cleanup costs Montewka Weckstr m and Kujala 2013 utilize Bayesian econometrics to explore a different model which raises the cost estimates in some cases According to BP the Deepwater Horizon incident cost the company over 61 billion Combined with lower per barrel oil prices even mega corporations like BP can ill afford environmental disasters let alone even comparatively small oil spills and cleanups Early Adopters of New Technology To see how oil companies are fast adopting new tech to both help the environment and their bottom line one needs to look no further than America s burgeoning hydraulic fracking industry Here clean water is almost as precious as gold and is at times difficult to come by Compounding this issue is a sometimes confusing Clean Water Act Recent arguments heard before the Supreme Court focused on how waters of the United States is defined According to Mark Barron of the law firm BakerHostetler an unclear definition of the term creates economic problems for just about everyone involved For land owners developers farmers ranchers energy companies and others this variability adds uncertainty to important aspects of planning and development wrote Barron also stating that the lack of consistent enforcements results in costs and delays that frequently make projects uneconomic with little or no commensurate environmental benefit Many energy companies that rely heavily on water are turning to more environmentally friendly and cost effective solutions to both access and reuse water Water reuse has always been complicated given that water used in the hydraulic fracturing process can quickly become unusable as it collects all forms of detritus Clarified water is optimal and the less pure the water gets the more unusable it becomes as well Quite often that wastewater is pumped into the ground to get rid of it Notably this can create small earthquakes as we ve seen in Oklahoma and parts of Pennsylvania Water reuse can help minimize this situation although up until recently the clarification process has been expensive and often dangerous Water reuse has typically involved the use of harsh and often toxic oxidants specifically Chlorine Oxide which is explosive under pressure These oxidants are also highly corrosive and often cannot easily be released back into the environment They can also be expensive although less expensive than constantly trucking water to and from a drilling site Damon Waters of Clean Chemistry is hoping to change all of that Waters and his partner Wayne Buschmann founded Clean Chemistry in 2012 with one vision Revolutionize water management through advanced chemical process solutions The company is on its way to doing just that with its signature product PeroxyMAX Using PeroxyMAX drilling companies can reuse wastewater any number of times According to Waters this is because their product is cheaper all in and that their residuals are biodegradable There are numerous Chlorine Oxide accidents that happen in the oilfield Waters added stating that using their product provides worker safety and pad safety advantage But the real benefit to what Clean Chemistry has to offer is the environmental aspect That their product is biodegradable means that unlike the harsher oxides that have been more popular oil companies do not need to worry about negatively impacting the environment with their wastewater And indeed companies appear to be catching on to cleaner safer and more economically advantageous products like PeroxyMAX According to Waters the oil and gas industry has been a fantastic partner They ll try stuff and they ll do it quickly he explained The industry is volatile but they re pretty receptive to innovation Environmental Protection from O G Is by Design One common refrain in media blogs and documentaries has been that the oil and gas companies are improper stewards of the environment Although this may have been true at one time this was more a consequence of an industrial revolution that from a wider standpoint had yet to learn that proper stewardship of the environment was even possible while still earning a profit Further much of the negative environmental impact on the environment most notably in the case of oil spills was concomitant with the growth of the industry It necessarily follows that as the oil industry grew so too did various drilling refining storage and transportation technologies And as it grew more competitive to meet growing demand for oil and gas products innovations drove technology in such a direction that balancing market and environmental concerns have morphed into an indistinguishable issue For the oil and gas industry the balancing act between market and environment is not an easy one it is however one of economic advantage In that sense for oil and gas protecting the environment through the use of technology is just part of a sound business policy Those companies that can t or won t find ways to balance the concerns of both likely won t last especially in a tight market Oilman Magazine November December 2017 OilmanMagazine com 21

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OILMAN COLUMN Interview with Dave McCarthy Senior Director of Products at Bsquare By Tim McNally can provide to them The following is an interview with Dave McCarthy Senior Director of Products at Bsquare Bsquare is an Internet of Things IoT service provider based in Bellevue Washington Tim McNally How did you get started with the company and how do you feel the company has progressed so far Dave McCarthy So personally I ve been with Bsquare for 11 years coming up this November and it s been really interesting to watch the company change and grow over time In the early days of the company we really focused on embedded software which I always describe as software anywhere other than a traditional laptop or PC This would be software in control systems or in gas pumps and all kinds of strange places where you couldn t just take a CD and put it in and load up the software it always requires special knowledge on how to marry software with unique hardware pieces and that s where we got our start Over time as we started working with different industries and different projects it progressed us along the path of starting on software and equipment and then moving into connectivity related to the software and equipment to where we are today which is really all about the data that is being generated by that equipment The things that we do we do in a lot of industries and for oil and gas we ve been involved now for probably only for a year or so TM Why does Bsquare have a focus on industrial data DM As I mentioned throughout its history Bsquare has been focused in general on helping companies realize business value in terms of smart connected devices and equipment The main driver of that value is how you can leverage the data in any aspect of the business Now industrial companies specifically are probably in the best position to reap the most benefit given the scale of the operation and really the amount of money at stake with the types of things that they do TM Have you found that oil and gas companies are pretty receptive to your products or are they rather reserved at first until they hear the kind of solutions that you DM Well I think the answer is different for us talking today than maybe it was a year or so ago Oil and gas companies are really understanding that they need to modernize their operations and the confluence of technology needed to achieve that fits into this overall umbrella of industrialized IoT That s what makes it a perfect fit for Bsquare and our products which are really focused on that Whereas a year ago people were still trying to understand whether or not this technology would really apply to them or should they should even invest in something now we are really seeing a lot of activity It no longer feels like a dream of what might happen in the future but it s actually tangible and real today TM Do you believe that the current economic situation in the oil and gas industry has contributed to companies being open to these sort of solutions or is it an awareness of the kind of advantages that a company like yours can provide DM I think it is hard to ignore in oil and gas the strain the current market price is putting on every company But I also see a competitive element As I was mentioning these concepts are no longer hypothetical and equipment manufacturers and operators are putting these concepts into practice Its forcing everyone to consider how that affects their competitive advantage If you look at it from an OEM equipment side most often the operators that are employing that equipment whether it s an offshore rig or a chemical plant for them uptime and reliability are so important And so any equipment manufacturer that can provide either more visibility or greater reliability by leveraging the data is going be in a much more competitive space TM Are the methodologies you all employ for each industry rather similar or is it attuned to each industry DM I would say that the methodology is similar When you look under the covers at what s required to do this kind of analysis there s always some level of data ingestion data cleansing machine learning and building analytical models Those concepts apply no matter which industry that we go into but it s also true that all of that data science alone isn t helpful unless you can combine it with subject matter experts in each specific industry you re working in So what s made our approach really successful is leveraging those tools to be able to do a lot of the heavy lifting and speed up the progress of understanding what s happening in it but then also working with those subject Dave McCarthy matter experts whether it s a petroleum engineer or a mechanical engineer to say well this is what the applied mathematics effectively say about your situation but allow them to help interpret that The other part which I think is super exciting is when the data can tell the engineer something they wouldn t have thought of themselves TM How do you envision the future of your partnerships with firms operating within the oil and gas industry in light of the advancement of interconnected devices DM Well it s definitely continuing to grow As I mentioned a few years ago we didn t really have a foothold in this industry but it has rapidly changed One of the reasons why it s changed is because of the fact that operators have been really starting to invest in that core foundational component which is we need to be able to pull back that data from the field in a cost effective way To be honest we embrace partnerships Our goal as a company is not to replace what is already out there but it is to make it better And we are seeing that now whether it s with other software companies that are coming together to solve different parts of the overall IoT problem or its partnerships with the company themselves In most cases this type of work becomes so strategic to these oil and gas companies that the relationship feels less like a we re selling you software and more like we are your technology partner helping to guide you through an area that you may not be familiar with We don t pretend to be an oil and gas company in any of those areas and nor should the oil and gas companies think they should have to become enterprise software companies There s a really good opportunity for everybody to focus on the parts that they do really well and help each other Oilman Magazine November December 2017 OilmanMagazine com 23

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NEWS AT A GLANCE Jim Chanos is Short on Shale By Tim McNally During the world renowned Delivering Alpha conference in New York Jim Chanos announced that his company Kynikos Associates was short on multiple U S Shale oil producers Being short means that an investment firm is betting that the current valuation of a company is too high and that the price of the stock will eventually fall to match a more realistic valuation Kynikos maintains a cynical view of the valuations given to companies operating within the shale industry due to fundamental flaws which Chanos believes are being overlooked by the general investment community People have been looking at the industry with rose colored glasses This is a problem with the North American shale business If we don t get a big pickup in the company s fortunes in the back half of the year it s going to struggle Chanos stated at the event according to CNBC Chanos believes that investors are ignoring certain metrics that are unfavorable for such firms and are instead focusing on the bright spots of operational financials As Chanos stated The way to think about it is that unlike other businesses your assets literally get burned up The amount of debt that some firms have taken on is unsustainable for longterm operations due to the limited cash flow presently available Fracking firms typically use a considerable amount of debt to finance operations when compared to standard production companies The obvious problem is the low price of oil Most firms are incurring substantial costs while chasing margins that are simply too slim for profitability Furthermore many of these companies cannot manage the costs with cash on hand and instead turn to debt to fund their projects But this situation creates quite a credit conundrum for the firm Kynikos examined about three dozen firms and found that their current expenses would entirely diminish their earnings by the end of this year Therefore the capital required for debt payments would not be available when the time comes to make good on promises to lenders 24 Chanos particularly pointed out his doubts concerning Continental Resources ability to operate profitably in the long term but he noted that there were a number of firms Kynikos was considering shorting Chanos did note that Kynikos had not shorted companies operating primarily within the Permian basin due to the affordability of oil extraction in the region relative to cost In investment diversification is always said to be a key factor to managing risk but perhaps in this given scenario it is more logical to seek out those few firms operating in regions where they can manage to produce a positive cash flow If that fails one can always turn to shorting the companies which seem to be drilling themselves into bankruptcy EIA Forecasts Record Oil Production In U S By Alex Mills Even though the Energy Information Administration EIA at the Department of Energy hedged its monthly analysis of energy markets in the U S because of Hurricane Harvey it predicted crude oil production will set a new record in 2018 EIA forecasts total U S crude oil production to average 9 3 million b d for 2017 and 9 8 million b d in 2018 which would mark the highest annual average production in U S history surpassing the previous record of 9 6 million b d set in 1970 U S crude oil production is estimated to have averaged 9 2 million barrels per day b d in August down about 40 000 b d from the July average Crude oil production in the Gulf of Mexico fell to a monthly average of 1 6 million b d in August down by 70 000 b d from the July level At the time of publication many oil production platforms in the Gulf of Mexico had returned to operation and EIA forecasts overall U S crude oil production will continue to grow in the coming months Refinery operations declined significantly following Hurricane Harvey Based on EIA s weekly report U S gross refinery runs averaged 14 8 million barrels per day b d the week ending September 1 down by 3 1 million b d from the previous week EIA forecasts refinery runs to average Oilman Magazine November December 2017 OilmanMagazine com Photo Credit Jonathan Mullen www 123RF com 15 3 million b d in September down from an estimated average of 17 1 million b d in August Refinery runs are forecast to increase to 15 9 million b d in October EIA expects much of the reduction in refinery production of petroleum products to be offset by a decline in petroleum product net exports Net petroleum product exports will average 1 1 million b d in September down from an average of 2 9 million b d during the first eight months of 2017 the report stated A reduction in net exports can either come from a decrease in exports or an increase in imports Additionally the reduction in production of petroleum products could contribute to larger than typical inventory draws for September U S regular gasoline retail prices reached 2 69 per gallon on September 11 up 29 cents from August 28 and the highest weekly average since August 2015 EIA forecasts the average U S regular gasoline retail price to be 2 60 in September and then fall to 2 40 in October which are 25 cents and 10 cents higher respectively than projected in August EIA forecasts the regular gasoline retail price to fall to 2 23 in December U S dry natural gas production is forecast

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NEWS AT A GLANCE to average 73 7 billion cubic feet per day Bcf d in 2017 a 1 4 Bcf d increase from the 2016 level Natural gas production in 2018 is forecast to be 4 4 Bcf d higher than the 2017 level In August the average Henry Hub natural gas spot price was 2 90 per million British thermal units MMBtu down 8 cents MMBtu from the July level Expected growth in natural gas exports and domestic natural gas consumption in 2018 contribute to the forecast Henry Hub natural gas spot price rising from an annual average of 3 05 MMBtu in 2017 to 3 29 MMBtu in 2018 NYMEX contract values for December 2017 delivery that traded during the five day period ending September 7 suggest that a range of 2 39 MMBtu to 4 34 MMBtu encompasses the market expectation for December Henry Hub natural gas prices at the 95 percent confidence level EIA expects the share of U S total utilityscale electricity generation from natural gas to fall from an average of 34 in 2016 to about 31 in 2017 as a result of higher natural gas prices and increased generation from renewables and coal Coal s forecast generation share rises from 30 last year to 31 in 2017 The projected generation shares for natural gas and coal in 2018 average 31 and 32 respectively Alex Mills is President of the Texas Alliance of Energy Producers The opinions expressed are solely of the author ExxonMobil Dethroned as the NumberOne Ranked Energy Company S P Global Platts By Tim McNally A Russian global energy behemoth has surpassed Exxon as the number one energy firm according to the S P Global Platt s Top 250 Global Energy Company Rankings The 16th annual issuance of Platt s Energy Company Rankings placed Russian firm Gazprom in the number one slot displacing the U S ExxonMobil from the spot which it had previously occupied for 12 years Companies with at least 5 5 billion in total assets were ranked by Platts using a formula which determines how well a firm performed based on four specific criteria asset worth revenues profits and return on invested capital Each category receives its own score and then the individual numerical scores are added up The firm with the lowest overall score is ranked in the first position Only one other U S firm besides ExxonMobil made the top ten list Valero which was ranked number eight came in one position higher than ExxonMobil which snagged the ninth ranking The report also notes that South Korean firm Korea Electric Power Corp took the fourth ranking in the top ten list marking 2017 as the the second year in a row that the firm made the top 10 list In addition to the firms listed above E ON SE from Germany came in second place Reliance Industries Ltd based in India took third and China Petroleum Chemical Corp took the fifth ranking India Russia and the United States all of which had two firms within the top ten list were the only countries with more than one energy company within the top ten highest performing firms The rankings represent a diverse set of firms from multiple continents around the world which have maintained a focus on their particular strengths As Harry Weber senior natural gas writer of S P Global Platts noted European utilities and North American pipeline operators got a boost from sticking to what they know best and shying away from more risky enterprises and territories This honed focus can help such firms to consistently operate at a certain level which can ensure success even in the midst of an industry downturn Regulated utilities in particular have an advantage because their revenues are largely defined and consistent and are not as susceptible to swings in oil and gas prices Such advantages were not enough to enable ExxonMobil to retain its number one position on the Platts rankings this year but perhaps it will enable the firm to reclaim its title in the near future Saudi Arabia and Russia Seen Forging Business Alliances By Tim McNally Two of the world s largest oil exporting countries Russia and Saudi Arabia have been forging a sort of professional relationship in recent years despite previous indicators that they would not work together Most recently Saudi Aramco indicated that it plans to sign multiple Memoranda of Understandings with certain Russian companies There are significant opportunities in a number of these areas for collaboration between Saudi Aramco and leading Russian companies stated Saudi Aramco CEO Amin Nasser according to a release from the firm In particular oil and gas services petrochemicals renewables advanced materials and other advanced technologies and cutting edge basic and applied research are all promising areas for bilateral cooperation continued Nasser As Business Insider notes the production cuts that OPEC has put into place for its members and willing participants outside of OPEC have been somewhat nullified by the increased exports and production of OPEC members such as Iraq and Iran According to data from Bloomberg Iraq exported 3 98 million barrels per day bpd to clients abroad which is the highest level seen since last December Similarly Iran exported 2 28 million bpd in September a level not seen since February However Russia which is not officially a part of OPEC has been dutifully participating in production cuts as part of OPEC s overall plan to diminish the global supply glut of oil This initiative of Russian and Saudi firms displays the willingness and desire of both countries to form a working partnership yet perhaps it also demonstrates the dire situation of the global supply glut The recent attempts of the oil cartel to cut down on the global supply of oil have somewhat contributed to the stabilization of the market but so far their attempts have not had a very potent effect on the resistant low price of oil Saudi Arabia seems to be faced with increased innerrebellion within OPEC which has been matched by increased cooperation from countries outside of the cartel With countries such as Russia appearing more willing to contribute to global production cuts than members within OPEC it should come as no surprise that Saudi Arabia is seeking to build strong professional relationships with countries outside of OPEC that support a similar objective The Kingdom seems to be simply following the path of least resistance Oilman Magazine November December 2017 OilmanMagazine com 25

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OKLAHOMA NEWS AT A GLANCE Oklahoma City Firm Plans to Pioneer Drilling of Two Mile Horizontal Well By Tim McNally Due to legislation that was part of Senate Bill 867 companies can now begin drilling two mile long horizontal wells in nonshale rock layers in Oklahoma As News OK first noted Tapstone Energy an Oklahoma City based oil producer plans to begin the process of drilling to such a length on its wells in Dewey County Doing so would mark the firm as one of the first if not the first producers to do so since the legislature has been passed Firms have been drilling two mile wells in shale rock since 2011 but this most recent approval enables producers to drill to such a length in all rock layers Firms could begin drilling so called long wells as soon as Thursday August 31 but Tapstone expects to be able to begin drilling proceedings towards the end of October after it has filed the appropriate paperwork with the Oklahoma Corporation Commission The firm is very enthusiastic about having the ability to drill long wells in all rock layers as there are many benefits associated with being able to extend a horizontal well up to two miles It means a lot to us Bob Costello Tapstone s general counsel and vice president of land told News OK We re excited to see what happens Part of the firm s excitement is centered around the fact that having the ability to drill two mile horizontal wells can potentially double the level of oil production in exchange for a considerably minimal increase in overall well cost Everything is improved through twomile wells in terms of efficiencies and costs Costello stated This is going to be new ground for us drilling two miles in that type of rock Our drilling people are confident it can go without a hitch The president of the Oklahoma Independent Petroleum Associations Tim Wigley further expounded upon the benefits of the legislature for both the industry and the state economy It s going to be great for the state and great for the industry When rigs are up and active that s what fuels the economy in this state That s when hotels are filled and restaurants are 26 Photo Credit Song Qiuju www 123RF com filled and people are buying new trucks The Oklahoma Oil and Gas Association also recently commissioned a study which uncovered the fact that job creation and economic output increase by 40 percent when companies are enabled to drill longer well In other words the state of Oklahoma becomes a more attractive investment opportunity for a variety of industries due to the uptick in overall productive activity Magellan and Valero Announce Joint Storage Facility in Texas By Tim McNally Magellan Midstream Partners L P and Valero Energy Corporation announced on September 14 that they would be working together to expand and develop the marine storage facility along the Houston Ship Channel in Pasadena Texas Ownership of the facility will be split 50 50 between Magellan and a Valero subsidiary and it is expected to have a storage capacity of five million barrels for gasoline diesel and jet fuel and renewable fuels In July 2016 Magellan announced that the facility would be undergoing phase 1 of construction which would allow Oilman Magazine November December 2017 OilmanMagazine com for a storage capacity of one million barrels Construction for phase 1 is still in progress and therefore phase two will be incrementally expanding on the capabilities enabled by phase 1 Both phases are expected to be operational by 2020 and will cost approximately 820 million Magellan is pleased to join forces with Valero to combine our extensive pipeline and terminals capabilities with their world renowned refining and marketing expertise to further expand the state ofthe art marine facility being constructed in Pasadena stated Magellan s Chairman President and Chief Executive Officer Michael Mears Magellan anticipates that the facility will enable the firm to meet the growing demand for their products Demand for refined products from the Gulf Coast continues to grow and together we are well positioned to continue expanding our marine capabilities to meet this demand from both domestic and international markets continued Mears Valero CEO and President Joe Gorder likewise expressed his enthusiasm about the chance to work with Magellan on this facility Valero is excited about this

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OKLAHOMA NEWS AT A GLANCE Photo Credit Zoran Orcik www 123RF com opportunity to work with an exceptional organization like Magellan to jointly develop this flexible and well positioned terminal stated Gorder Valero Chairman President and Chief Executive Officer On the same day Magellan was also mentioned by a U S Coast Guard official who announced that a majority of the gasoline that was recently spilled from Magellan s storage tank farm in Texas is largely unrecoverable The gasoline was originally released after Hurricane Harvey whipped through the region and caused the storage tank to fail Roughly 20 percent of the 461 000 gallons of gasoline resource are expected to be useable The remainder either evaporated or soaked into the ground causing concerns about potential groundwater contamination Although we do not have an estimate of the total volume of soil that we will remove and replace at this time the project will comply with all laws and regulations stated Magellan spokesman Bruce Heine according to the Washington Post Ideally the gasoline will not have penetrated far enough into the ground to contaminate any major sources of water but removing the soil will hopefully prevent any lasting damage 400 Million Project Planned for Oklahoma East STACK Play By Tim McNally Oklahoma City based Tall Oak Midstream III LLC announced on September 19 that it is building a natural gas gathering system in Oklahoma s East STACK play the next large project which is part of a series of investments the firm has dedicated to developing its prospects in the region Tall Oak III was formed two months ago with financial backing of up to 200 million from EnCap Flatrock Midstream and specializes in a variety of fields including the gathering of natural gas the gathering and transportation of crude oil compression treating and processing condensate and water handling and product marketing solutions The Tall Oak companies have quickly established a very strong record of rapidly developing gathering and processing solutions that offer reliable access to the best markets stated Tall Oak chief commercial officer Carlos Evans We remain focused on deploying the necessary capital and developing the infrastructure needed to stay ahead of our customers immediate and long term needs The planned system will consist of approximately 50 miles of 12 to 20 inch pipeline two compression facilities a 5 000 barrel per day bpd stabilizer a slug catcher and condensate storage facilities The firm also expressed its desire to add a cryogenic processing facility to the East STACK play and is currently conversing with producers in the area to determine an optimal location The Oklahoma East STACK play or the Arkoma Woodford basin has eight active rigs all of which are primarily searching for natural gas NewsOK notes The East STACK is an exciting play that lacks the infrastructure required to handle the emerging growth in production from rich horizontal gas wells stated Evans The firm has invested 50 million into the project so far and plans to invest an additional 350 million according to CEO Ryan Lewellyn We have been talking to key potential customers in the area and we liked what we heard Lewellyn told NewsOK There s a need for pipeline infrastructure and processing capacity to accomplish the growth customers are expecting in the area The system is expected to be operational by the end of the year Oilman Magazine November December 2017 OilmanMagazine com 27

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TEXAS NEWS AT A GLANCE Harvey Creates Issues for Texan Oil Industry By Tim McNally The catastrophic flooding and highvelocity winds accompanying Hurricane Harvey had overarching effects on both residents and businesses in the Gulf Coast area particularly in Texas The difficulty for oil and gas firms is mainly concentrated within the downstream portion of the market as refineries have been unfortunately positioned to face the brunt of the storm CNN Money reports that ten oil refinery plants in the Houston and Corpus Christi areas were shut down as of August 28th due to the perilous conditions caused by the storm Closed refineries included Exxon Mobil s refinery in Baytown which yields a processing capacity of up to 584 000 barrels of oil per day oil fell 3 on Monday August 28 and continued to fall further on the following day As CNBC noted multiple firms with considerable interests in the region experienced noticeable declines in the prices of their stocks Carrizo Oil and Gas experienced an 11 39 percent decrease in the price of The entirety of the Gulf area accounts for roughly one third of the United States refinery capacity The fact that the energy market is already highly saturated with oil lessens the potential effects that the storm could have on the price of oil In addition the issues caused by the storm are primarily causing problems for the refineries in the Gulf Coast region which is why U S gasoline futures still saw a 7 increase when markets opened Monday The short answer is that gas prices are going higher They re going higher at an annoying rate not an apocalyptic rate but it will be noticeable particularly east of the Rockies in the next few days Tom Kloza global head of energy analysis at Oil Price Information Service told CNBC Meanwhile the price of their stock from Friday the 25th to Tuesday the 29th dropping to a low of 11 83 per share before recovering 5 33 percent to 12 46 per share during the last half of Tuesday EOG Resources Chesapeake Energy Devon Energy Sanchez Energy and Wildhorse Resources also experienced 28 Photo Credit Kheng Ho Toh www 123RF com to varying degrees comparable price movements in each of the companies respective shares Recovering from Hurricane Harvey The Aftermath Phase By Bart Kohler Disaster response and business continuity focus on the immediate response during the event and long term recovery However critical to this process is the immediate aftermath and short term because there are very low levels of law and order infrastructure and organization the ability to secure human capital people assets and infrastructure are essential to ensure a smooth and effective recovery Hurricane Katrina was followed by high levels of looting and violence The threat from random acts of violence and looting around Houston are much lower because it s Texas Texas is called the friendly state for a reason and helping their neighbors in the time of need is second nature In addition to the generosity of spirit which has driven Texans to reach out to help each other is the defensive instinct Oilman Magazine November December 2017 OilmanMagazine com protecting each other High gun ownership and the castle laws that protect citizens who are defending themselves their property and that of their neighbors ensures politeness the adage that an armed society is a polite society might have some credence Therefore the threat to individuals and families of armed groups roaming the streets looking for easy targets is much lower than it has been in the wake of some previous natural disasters including after Katrina However crimes of opportunity will be a threat and the real threat to businesses are targeted crimes against people and facilities that are known to have cash or asset value In the disaster recovery environment asset value isn t necessarily cash but generators and other infrastructure items that can be used or sold for cash are This is also true of information technology systems equipment and tools that have value in the black market etc Enterprising criminals especially those with boats that can gain access quickly to offices and infrastructure are already discussing if not executing plans to raid corporate facilities now while

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TEXAS NEWS AT A GLANCE the executives are still concentrating on securing their families Disaster relief and security operations will likely begin to see the deployment of drones Their use to ensure the efficient searching of large areas and later to use minimal manning to protect those areas is likely to create new challenges for deconflicting airspace This will be particularly apparent while search operations are sharing airspace with helicopter recovery operations The focus on security will quickly follow and all force multipliers are helpful in an environment where there are limited resources Expect to see the widespread use of drones in this role especially as the reconnaissance and search capability that is backed up by quick reaction forces of security personnel Companies should already know where all their people are For those executives who have secure technology or information in their homes both the families and the assets should be secured immediately The second priority should be to quantify the threat to the business if IT equipment and other items are stolen accessed and act to prevent that The threat of loss in the confusion can massively outweigh the cost of protecting these assets The confusion of the next two weeks is a thief s paradise Companies should look now to securing their people as a fundamental duty of care to employees and then to securing all of the non personnel assets that are critical to running the business or whose cost of loss in the short term could cripple the business Oilfield Helping Hands Lends Assistance to Hurricane Victims By Emmanuel Sullivan Oilfield Helping Hands OHH has established a fund to help with financial assistance in the aftermath of Hurricane Harvey The nonprofit charitable organization is comprised of volunteers who provide assistance to oilfield workers in crisis OHH was founded in 2003 by several Halliburton Baroid employees in Houston when they organized a sporting clays tournament to help a fellow employee whose family savings had been depleted by several serious and expensive surgeries The event was such a huge success the group decided to continue their efforts To be eligible for Hurricane Harvey assistance applicants must work for one of OHH s corporate members or live and or work within one of the areas covered by an OHH Chapter Applicants must have a minimum of five years work experience in the exploration and production sector of the energy industry and 75 of their income must have been derived from that employment OHH board members are committed to quickly reviewing and processing funding requests from qualified applicants to assist oilfield families in the Houston and surrounding areas as they rebuild their homes and lives Applications can be completed at oilfieldhelpinghands org OHH raises money through donations corporate memberships and fundraising events Annual events range from the fall and spring sporting clays tournament which attracts recreational shooters and champions from around the country the saltwater fishing tournament and OHH s annual golf tournament Since 2003 OHH has assisted hundreds of families distributing more than 3 8 million in assistance through chapters in Houston Oklahoma Louisiana the Rocky Mountains the Permian Basin and South Texas In 2015 OHH awarded 521 179 to 61 recipients Corporate membership is key to achieving the financial goals that OHH relies on to support its mission The organization s platinum gold and silver corporate members include companies such as Newfield Anadarko Samson Energy Hunting Sun Coast and Halliburton just to name a few Event dates donations preferred partners membership and sponsorship opportunities can be found on the organization s website www oilfieldhelpinghands org email at info oilfiledhlepinghands com or calling 713 325 807 Hurricanes Present Huge Challenges to Petroleum Industry By Alex Mills Hurricane Harvey has presented a challenge for the petroleum industry s efforts to continue to providing consumers with a safe reliable and affordable product during extremely difficult circumstances Even though the 50 inches of rain along the Gulf Coast caused some 13 refineries to temporarily cease operations many are now back online When Hurricane Harvey hit shore near Corpus Christi on Aug 24 crude oil prices on NYMEX closed at 47 43 per barrel and RBOB gasoline closed at 1 6641 per gallon A week later on Aug 31 crude oil prices had dropped 0 20 to 47 43 but gasoline rose 0 4758 to 2 1399 because of the decline in refined products The Energy Information Administration EIA reported that on Sept 4 the average retail price of gasoline was 2 68 for the U S an increase of 0 28 from the previous week The largest fuel price increases occurred in Texas which averaged increases of about 0 40 per gallon EIA reported that southern states Louisiana Alabama Mississippi and Florida experienced increases from 0 35 to 0 39 per gallon Western states had the smallest increase which was in the 0 10 to 0 15 per gallon range Some service stations in Texas experienced shortages but the shortages were temporary and spotty One report from Merrill Lynch said the peak outage was 4 4 million barrels per day from Corpus Christi to Houston to Beaumont Port Arthur Refineries in Corpus Christi which were the first hit are back operational Many of the Houston refineries are back in partial operation Beaumont Port Arthur refineries have not come back online yet Getting the refineries back into production is a part of the equation of getting more gasoline to consumers Another key piece of the puzzle involves the distribution network of pipelines and trucks which are slowly coming back to full strength Prices seem to have settled Gasoline closed at 1 6733 on Sept 7 Just as the challenge of Harvey appears to be waning another challenge named Hurricane Irma is on the horizon and headed for Florida The damage created by Harvey is legendary Irma s powerful winds have been recorded at a steady 185 miles per hour which will undoubtedly create a new set of challenges Alex Mills is President of the Texas Alliance of Energy Producers The opinions expressed are solely of the author Oilman Magazine November December 2017 OilmanMagazine com 29

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LOUISIANA NEWS AT A GLANCE Louisiana LNG Export Facility Secures Second Substantial Deal By Tim McNally A liquefied natural gas LNG exporting plant currently under construction in Cameron Parish Louisiana is now part of an agreement to supply 1 million metric tons of LNG per annum or 1 4 billion cubic meters of natural gas per year to a European electrical firm Venture Global Calcasieu Pass LLC the firm developing the Calcasieu Pass LNG export facility recently released a statement detailing a 20 year agreement with European based electrical company Edison The facility is expected to reach completion in 2021 which is when the agreement between the two firms will begin to come to fruition This is the second such deal the firm has announced within the past two years In February of 2016 Venture Global announced that it had secured a sales and purchase agreement with Shell NA LNG LLC to export LNG from the same facility The terms of the deal are very similar to the agreement Venture Global has with Edison These forward looking deals help to solidify Louisiana s status as a focal point for LNG exports As the Louisiana Oil and Gas Association LOGA stated in an article from August Louisiana has been Leading the Way in the LNG Renaissance The article elaborates on how the state has gone from being an importer of natural gas to an exporter mainly due to the many LNG facilities and companies which are operating in the area Recently Venture Global announced an 8 5 billion LNG complex G2 LNG is planning for an 11 billion natural gas facility Magnolia LNG announced a planned 3 45 billion facility and Cheniere shipped over 100 cargoes of domestic LNG starting back in February The increased exportation of LNG like products has been accompanied by an increase in production and exploration for natural gas resources in the Louisiana Haynesville Shale formation The region was previously thought to be too costly but due to our plentiful pipeline infrastructure that allows the movement of LNG to our export facilities investors 30 Photo Credit Sergey Sukhanov www 123RF com are leaving their northern U S plays and heading down south LOGA noted The development of pipelines which enable the swift reliable transport of natural gas combined with the LNG export facilities which have been proliferating in the area have coalesced to create an optimum environment for the production and exportation of liquefied natural gas Louisiana certainly seems to be set for a bountiful future with LNG Lake Pontchartrain Explosion Brings Attention to Operations in the Region By Tim McNally The recent tragic explosion on an oil rig on Lake Pontchartrain in Louisiana has brought attention to the largely overlooked oil operations that were and continue to be conducted on the lake The lake has not seen a large amount of drilling activity within the past twenty plus years since a moratorium was placed on new oil operations on the lake However the pre existing operations continued to proceed as normal one of which resulted in the explosion on October 15th The platform was operated Oilman Magazine November December 2017 OilmanMagazine com by Clovelly Oil Co a New Orleans based independent exploration firm that holds stakes in the seven active wells still operating on the lake according to WWLTV A Clovelly spokeswoman told WWL that the fire was not caused by drilling operations but rather by routine maintenance Furthermore the firm has not had any safety or permit violations on any of its Lake Pontchartrain operations and the platform in questions passed an inspection last month without any issues Nonetheless the U S Occupational Health and Safety Administration has announced that they would be joining the existing investigation into the explosion which resulted in one death and several injuries OSHA has an open and ongoing investigation into this incident stated OSHA spokesman Juan Rodriguez NOLA reported Part of the reason the Lake has gone overlooked for oil operations is because of the comparatively low productivity of the region The Lake Pontchartrain Basin Foundation released a report in 2010 dictating the low quantities of oil and gas

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LOUISIANA NEWS AT A GLANCE creation and a pillar of President Trump s plan to make the United States energy dominant Photo Credit Brian McDonald www 123RF com within the lakes basin WWL noted that the report stated The low production is due to the relatively poor conditions for oil and gas accumulations in the lake and it is the reason major oil companies have generally avoided Lake Pontchartrain Despite this many proponents for oil and gas drilling in the region purport that the location and convenience of the lake offer unique advantages for operators in the region As Gifford Briggs president of the Louisiana Oil and Gas Association stated If you re in the middle of Lake Pontchartrain a lot of those challenges aren t there so you re going to be able to look at producing the resources at a lower cost Because of that it s more economical Perhaps the lake does offer certain advantages over other locations and ideally future operations will have no such complications as the regrettable occurrence which unfolded on the Clovelly rig Largest Oil and Gas Lease Sale Set to Take Place in New Orleans By Tim McNally The U S Department of the Interior DOI announced on October 24 that they would be accepting bids for an offshore oil and gas area which roughly equates to the size of New Mexico The 77 million acre lot located in the Gulf of Mexico is expected to fetch approximately 120 million for the U S Treasury and the Gulf Coast States Texas Louisiana Mississippi Alabama and Florida are expecting to see a boost to their general economy as the availability of the offshore areas for drilling will bring new job opportunities and state revenues Ryan Zinke the Secretary of the DOI stated that In today s low price energy environment providing the offshore industry access to the maximum amount of opportunities possible is part of our strategy to spur local and regional economic dynamism and job Indeed states which depend on the economic opportunities brought to them by the energy industry are very much looking forward to the sale This is great news that our oil and gas industry in Louisiana sorely needs This is the largest sale in U S history and it will create jobs and bolster our state and national economy stated U S Senator John Kennedy Our Louisiana workers are ready to go back to work Likewise Congressman Pete Olson stated Oil production when done safely and responsibly is a win for Texas and the Gulf Coast economy and adds to America s energy security This is not the first time the DOI has opened up offshore drilling regions for sale As the statement from the DOI notes Proposed Lease Sale 250 will be the second offshore sale under the National Outer Continental Shelf Oil and Gas Leasing Program for 2017 2022 A similar offering known as Lease Sale 249 was announced last year and although it was also quite large in magnitude it was about one million acres shy of matching the current number of acres being sold in Lease Sale 250 An estimated 0 21 to 1 12 billion barrels of oil and 0 55 to 4 42 trillion cubic feet of gas are expected to be available for development within the 77 million acre region The DOI notes that there are certain stipulations regarding the protection of biologically sensitive resources and a responsibility of the purchasing parties to minimize potential risks to the environment The auction for the offshore leases will be live streamed from New Orleans in March of 2018 Oilman Magazine November December 2017 OilmanMagazine com 31

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OILMAN COLUMN Why Selling Crude Oil to China is Good for America By Jason Spiess Continental Resources Inc recently announced its first ever sale of Bakken oil specifically for delivery overseas Continental Resources has sold 1 005 000 barrels of crude oil for November delivery to Atlantic Trading and Marketing ATMI which intends to export the oil to China This is a historic day for Continental and begins a new chapter in our long term strategy to establish multiple international markets for American light sweet oil said Harold Hamm Continental s Chairman and Chief Executive Officer This new normal was created by the American shale energy revolution and the lifting of the 1977 crude oil export ban We expect to see many similar industry transactions in coming months and years Continental Resources is a top 15 independent oil producer in the U S Lower 48 and a leader in America s energy renaissance Based in Oklahoma City Continental is the largest leaseholder and one of the largest producers in the nation s premier oil field the Bakken play of North Dakota and Montana The company also has significant positions in Oklahoma including its SCOOP Woodford SCOOP Springer and SCOOP Sycamore discoveries and the STACK plays According to Continental Resources the daily November sales transactions of 33 500 barrels per day will take place in Cushing Oklahoma ATMI then plans to transport the oil for loading on tankers at Texas ports Jason Spiess fit for these refineries especially in Europe and Asia Mr Hamm said Blu Hulsey Senior Vice President of Government Relations and Regulatory Affairs Continental Resources said the export issue was something the industry worked on collectively for a number of years but he recalls the last couple of years which added pressure seemed to pay off We worked really hard on that in 2015 Hulsey said The artificial difference between world price and Brent price WTI that was really something that allowed us to go to Capitol Hill to talk about our need to gain world market and talk about one disadvantage that was putting U S producers to world producers This export of crude oil overseas marks another chapter in a long story of creating an American energy market for the planet Many in the industry believe the current 6 discount to Brent should not exist because of the consistency and high quality of WTI as well as relative shipping costs In December 2015 the U S lifted its ban on oil exports allowing foreign sales to be transacted without a license Oil exports have grown steadily in the past two years primarily to foreign refineries configured specifically to process light sweet crude oil We recognized back in 2015 when we were working to lift the export ban that American light sweet oil would be a good Stabilized U S production and increasing industry sales of American crude to international markets will drive down U S inventories correcting much of the recent disparity between Brent and WTI prices Hamm said Modern modes of transport in the crude oil sector today eliminate price disparities between markets and allow free markets to work 32 Oilman Magazine November December 2017 OilmanMagazine com Hulsey sees this overseas contract as a benefit for not only the producer but the consumer as well The ability for us to get long term contracts with not only refineries in the U S but as well as refineries around the world it puts producers in the driver s seat of where we are going from an energy perspective Hulsey said That s really beneficial as we talk about long term energy security long term energy dominance The Trump administration has talked before about what that means for jobs and our economy and obviously just energy to do economic activity in our country Hulsey added that these relationships will also give the United States new allies and customers As we continue to do things from a development standpoint finding those markets ensuring that we have those buyers so we can as Americans enter into partnerships to provide energy to other parts of the world and create allies through energy development is a key part or geopolitical improvement in what our country is going to do Hulsey said That will benefit both the producers and the consumers

Oilman Magazine Nov/Dec 2017

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