The Bakken Magazine - November/December 2016 by BBI International

NOVEMBER/DECEMBER 2016

To Drill or to DUC Operators, Rig Providers Offer Views on 2017 Plans Page 20

Plus

Industry Argues For Powerful New Message Page 14

And

The Mood in Texas, Oklahoma Page 13

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CONTENTS

NOVEMBER/DECEMBER 2016

VOLUME 4 ISSUE 6

Pg 20

EXPLORATION & PRODUCTION

Glancing at 2017: Bakken Activity Expectations Insight, information and perspective on 2017 plans from several of the Bakken’s leading operators and drilling rig providers. BY LUKE GEIVER

DEPARTMENT

Pg 24

IN PLAY

Wilson M. Laird Core and Sample Library ready for Bakken 2.0

Pg 14

By expanding and enhancing the core library, geologists can continue to research the Bakken and other under developed unconventional resources in North Dakota.

INRASTRUCTURE & CONSTRUCTION

BY THE BAKKEN MAGAZINE STAFF

Telling The Bakken's True Story

4 Editor’s Note

Remember Parts of 2016 BY LUKE GEIVER

Protests over construction of the Dakota Access Pipeline have some in industry calling for a new approach to communications.

6 ND Petroleum Council: The Message

BY PATRICK C. MILLER

The Facts About DAPL BY RON NESS

5 Events Calendar

ADVERTISER INDEX 27 AE2S 28 Applied Air Systems ON THE COVER: A Bakken drilling rig at work on the horizon while a Bakken pumpjack operates near Mandaree, North Dakota. PHOTO: THE BAKKEN MAGAZINE

2 Baker Hughes Inc. 13 Bartlett & West 19 Bluebeam Software, Inc.

12 ISCO Industries 17 KLJ 16 Matrix Service 18 Protego USA, Inc. 5 The Bakken Conference & Expo

25 Convey-All USA

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EDITOR'S NOTE www.THEBAKKEN.com

Remember Parts of 2016

VOLUME 4 ISSUE 6 EDITORIAL

The national mood on energy development is always changing and never the same from region to region. Depending on the mood of the decision maker or the region he or she is from, energy development can be greatly impacted. Because of the Dakota Access pipeline protest saga, the Bakken is a prime example of this, of a place impacted by decision makers who are Luke Geiver both absent from a particular energy development region Editor and hold a particularly negative perspective on the regionThe Bakken magazine specific energy development, all based on, and influenced lgeiver@bbiinternational.com by, non-related issues. This month, Staff Writer and Photographer Patrick C. Miller explored the lessons learned from the protest drama in the Bakken. His feature, “Telling The Bakken's True Story,” reveals multiple themes, including one that could be taken as a call to action to all Bakken-linked entities large and small involved in energy development. Every group needs to help in influencing the mood on energy development. Communication plans and messages have to be in place for both formal and informal occasions. That means doing more to tell the positive story and impact of the Bakken’s development and the greater oil and gas industry as well. Activities and outreach efforts by several industry groups have already done so much for the Bakken and created, for the most part, a state well-educated, well-versed and in favor of the amazing impact of the Bakken, and, on a larger scale, unconventional oil development and the efforts necessary to make it happen. However, even with so much accomplished, more needs to be done. As Miller writes, it’s not enough anymore for a company to simply keep its figurative head down and just do their figurative job. In a time when information—true or not—is available and updated by the minute, providing constant, accurate and important information is no longer an option, it is a must. Tell your story, or let someone else tell it for you. While Miller’s report helps explain a major PR-related issue impacting the global production of oil and gas, we also feature a Bakken-specific piece looking at early plans for 2017 by operators and drilling rig providers each. And, don’t let the negative connotations of the NoDAPL movement cloud the reality of the Bakken. I’m excited for you to read our second feature, “Glancing At 2017: Bakken Activity Expectations.” Among the topics covered in it, the clearest ones point to a positive mood and ramp-up plans––elements that were difficult to find in 2016. The story went to press before the oil-price-boosting OPEC decision came to adjust production volumes amongst members. The mood has only gotten better since OPEC’s move and when we look beyond 2016 or the DAPL protests that marred the back half of the year, we can already see how different and important 2017 will be to the Bakken. We look forward to talking with you or writing for you in 2017. Thank you,

Editor Luke Geiver lgeiver@bbiinternational.com Staﬀ Writer Patrick C. Miller pmiller@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

PUBLISHING & SALES Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com President Tom Bryan tbryan@bbiinternational.com Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Vice President of Content Tim Portz tportz@bbiinternational.com Marketing & Sales Director John Nelson jnelson@bbiinternational.com Business Development Manager Bob Brown bbrown@bbiinternational.com Circulation Manager Jessica Tiller jtiller@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

ART Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Lindsey Noble lnoble@bbiinternational.com

Subscriptions Subscriptions to The Bakken magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States. To subscribe, visit www.TheBakken.com or you can send your mailing address and payment (checks made out to BBI International) to: The Bakken magazine/ Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@bbiinternational.com. Advertising The Bakken magazine provides a speciﬁc topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To ﬁnd out more about The Bakken magazine advertising opportunities, please contact us at 866746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/ or space. Send to The Bakken magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to lgeiver@bbiinternational.com.

For the Latest Industry News:

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

Please recycle this magazine and remove inserts or samples before recycling

EVENTS CALENDAR

The Bakken magazine

will be distributed at the following events: DUG Rockies

March 15-17, 2017 Denver, Colorado Issue: March/April 2017 The Bakken magazine

Williston Basin Petroleum Conference May 2-4, 2017 Regina, Saskatchewan Issue: March/April 2017 The Bakken magazine

DUG East

June 21-23, 2017 Pittsburgh, Pennsylvania Issue: May/June 2017 The Bakken magazine

The Bakken Conference & Expo

July 17-19, 2017 Bismarck, North Dakota Issue: July/August 2017 The Bakken magazine

North Dakota Petroleum Council Annual Meeting September 26-28, 2017 Grand Forks, North Dakota Issue: August 2017 The Bakken magazine

NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

PIPELINE ROUTE: Contrary to reports, a pipeline route near Bismarck, N.D., was never a viable option. Such a route would have been 11 miles longer, crossed 33 additional waterways and affected 48 miles of undeveloped land. BELOW THE SURFACE: At 92 feet below the riverbed, the pipeline would be 88 feet below the required distance set by the federal government. MULTIPLE RIVER CROSSINGS: Along with the Missouri River in Morton County, N.D., the DAPL will cross the Big Sioux River near Sioux Falls, S.D., the Des Moines River in Iowa and the Mississippi River.

CONSTRUCTION CHARACTERISTICS: The Laborers International Union of North America, a group responsible for representing the pipeline workers employed to build the DAPL, have said the strategies and technologies used on the DAPL are at the front of the pack in all of the U.S. PHOTO: THE BAKKEN MAGAZINE

The Facts About DAPL The debate over the Dakota Access Pipeline has become one that is centered almost entirely on emotion and politics rather than reason, logic or science, as was proven when President Obama refused to grant operators the final easement required to complete the project. That decision marked

a disturbing day for America because it endorsed the fact that lawless, intimidating and terrorist behavior can be rewarded. But this decision doesn’t change the facts. These are facts that have gone largely ignored, and there are many, many people who simply want straight-to-the-matter answers. We field many of these questions,

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

By Ron Ness

and some individuals even offer advice or opinions: “Why not make the pipeline extra thick?” “Could the company monitor the pipeline regularly?” “Maybe it should follow in the path of existing infrastructure off the reservation?”

NORTH DAKOTA PETROLEUM COUNCIL

Our answer to these questions, which are a simple “It is” or “It does” leaves many of these inquiring and eager-to-learn individuals shocked. “Why isn’t this information being shared?” they’ll ask. The information has been shared, but all too often it is drowned out by the drama and emotion that have engulfed this discussion. It is time to bring these facts to the forefront. Among the facts often ignored is the citing of the pipeline. It is a common misconception that the pipeline was originally slated to run north of Bismarck, but was changed because the “people of Bismarck didn’t want it.” This was not the case. The pipeline was never a serious option for the people of Bismarck to even consider because there were too many parameters that made it an unviable option, including the fact that it would have been 11 miles longer, crossed 33 additional waterways, affected 48 miles of greenfield—or undeveloped lands—and it would have been nearly impossible to build because of the North Dakota Public Service Commission’s requirement that a utility not be within 500 feet of a dwelling. In addition to this, it is preferred that new infrastructure run along the same corridor as existing infrastructure, otherwise known as brownspace, and so a better alternative seemed to be to follow the present route of a natural gas pipeline built in 1982 and a high-voltage transmission line—the route that was ultimately chosen. The decision had nothing to do with race. It had nothing to do with money. It had everything to do with minimizing the impact to land, which has been a major goal of the industry for more than a decade. Additionally, because it ran along the same route as existing infrastructure (areas that have already been cleared not once, but twice) it drastically decreased the chances that cultural artifacts would be disturbed. Even then, Energy Transfer Partners (ETP) were diligent in surveying the route to ensure that cultural artifacts were not disturbed.

‘Most important, this is a legal pipeline that followed all the rules and regulatory process for permitting. This is admitted by the Army Corps of Engineers that approved the permit.’ To suggest that discrimination played into the route decision lacks all logic. The pipeline crosses the Missouri once 14 miles upstream from Williston’s water intake and it will also cross several other rivers and streams along the route, including the Big Sioux River near Sioux Falls, South Dakota, the Des Moines River in Iowa, and the Mississippi River. These resources are important, which is why ETP also went above and beyond the state and federal requirements to ensure that our land and water resources would be protected in the unlikely case of a mishap. At the Missouri River crossing in Morton County specifically, the pipe will be 92 feet below the riverbed, which is 88 feet more than what the federal government requires. Gravity alone dictates that any leaks will not make it near the river, but despite that, ETP planned for additional safety features,

including extra-thick steel and double walls to help prevent corrosion and mitigate any possible leaks. It will also have shut-off valves on both sides of the river so that if state-of-the-art monitoring technology senses even the slightest change in pressure, the section will be shut down until it can be inspected and repaired. The pipeline will be monitored 24 hours a day, 7 days a week and 365 days a year by full-time operations maintenance staff including aerial inspections every 10 days, which is more than the federal requirement of just 26 times per year. This pipeline truly will be among the most advanced in our nation. Most important, this is a legal pipeline that followed all the rules and regulatory process for permitting. This is admitted by the Army Corps of Engineers that approved the permit and recommended to Assistant Secretary of the Army for Civil Works Jo-Ellen Darcy that the easement be granted, it is confirmed by Standing Rock Tribal Chairman Dave Archambault III, who is quoted saying, “That pipeline had every right to go through,” and it was confirmed by four federal judges. Many facts have been ignored in the argument for this pipeline. Those who truly want the facts can visit www.ndoilcan.com/ dapl for a list of this and other information with sources. We only hope that calmer heads may soon prevail, and we can return to the North Dakota way where we come together to work toward solutions and progress for our state. Author: Ron Ness President North Dakota Petroleum Council tsandstrom@ndoil.org 701-557-7744

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BAKKEN NEWS

BAKKEN NEWS & TRENDS

GE’S EXPANDING REACH: From gas-turbine-driven compressors like the one pictured here, to digital oilfield software, GE Oil & Gas continues to expand into the oil and gas sector. PHOTO: GE OIL & GAS

GE CEO on Baker Hughes purchase: right time to invest With its purchase of oilfield services firm Baker Hughes, GE will now be present in the Bakken from molecule to megawatt. At a time when other companies are pulling back during a downturn in the oil and gas industry, Jeff Immelt, CEO of GE, said his company likes to position itself for growth. “This is the right time in the cycle to invest,” Immelt said of the Baker Hughes acquisition. Through the deal, GE will own 62.5 percent of the 8

new company that will remain operating as Baker Hughes. GE also agreed to pay $7.4 billion to existing Baker Hughes shareholders. Lorenzo Simonelli, current CEO of GE Oil & Gas, will maintain his position in the newly formed company. Martin Craighead, current president and CEO of Baker Hughes, will now be the vice chairman of Baker Hughes’ board of directors. The deal is one of several GE Oil & Gas has made to strengthen its position in the

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

industry during the past three years. In 2013, GE purchased artificial lift provider Lufkin. Earlier this year, GE Oil & Gas opened a research and technology development center in Oklahoma City. Both Immelt and Simonelli can see instant benefits to the oil sector related to the Baker Hughes transaction. “An oilfield service platform is essential to deliver digitally enabled offerings to our customers,” Immelt said. Predix, a digital predictive and

analysis software tool developed by GE can be used in the field, he said. Simonelli believes GE can bring its battery technology to the oilfield through Baker Hughes. The technology, he said, can help downhole operations be drilled and completed faster. The deal should be completed in mid-2017. Baker Hughes has Bakken offices in the North Dakota communities of Williston, Dickinson and Minot.

BAKKEN NEWS

Dunn County now has lowest Bakken breakeven prices The cost of doing business in the Bakken is getting lower. According to the North Dakota Department of Mineral Resources, the oil prices at which an operator will breakeven have dropped between $5/barrel and $13/barrel for the major oil producing counties in North Dakota. In Dunn County, breakeven prices currently in the mid-teens rival those seen in the Middle East, said Lynn Helms, director of

the NDDMR during his November industry update. The breakeven prices now in play throughout the Bakken are vastly different than those seen in January 2015 when the core counties of the Bakken required $30/b prices and fringe counties such as McLean or Divide needed oil in the mid-$70/b range. “What we’re seeing are the industry efforts to increase efficiency and move to lower and lower breakeven prices,” Helms said.

The addition of gas-capture and takeaway infrastructure combined with new well completion designs that are yielding greater production volumes has played a major role in lowering the breakeven prices required in the Bakken. Dunn County, always considered one of the main four counties for oil production in North Dakota, appears to have overtaken McKenzie County as the most attractive place for operators, based on breakeven prices.

Q3 2016 BAKKEN BREAKEVENS Dunn $15 McLean $16 McKenzie $17

Slickwater completion designs that include 50-frack stages minimum per well are pushing up production volumes in Dunn County. “The wells are coming in 200 to 300 barrels per day better than McKenzie County wells, and they have a lower gas-oil ratio,” Helms said. “When looking at breakeven values below $20/b, it’s as good a place to drill as any place in the world,” he said.

Williams $24 Mountrail $29 Stark $29 Burke $78 Divide $84

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BAKKEN NEWS

Tesoro spends $700M for Bakken gathering lines, gas plants Tesoro Corp.’s presence in the Bakken continues to grow. Only months after acquiring a Bakken crude-supplied refinery in western North Dakota, the company’s logistics arm has spent $700 million on 650 miles of gathering pipeline and two natural gas processing facilities. Greg Goff, chairman and CEO of Tesoro Logistics LP, said the recently acquired assets have a chance for significant expansion and should be

durable during the current oil price environment. The pipeline and gathering facilities are located in two major oil fields within the Williston Basin: the Pronghorn and Sanish fields. Acreage dedications from 10 different oil producers already exist within the area where the pipelines exist. Whiting Petroleum sold its 50 percent stake in both the Belfield natural gas processing facility along with its 50 percent stake in the Robinson Lake

plant to Tesoro. Jim Volker, chairman, president and CEO, said the $375 million gained from the sale will be used to help fund development in the Williston and DJ Basins. “This sale aligns with our ongoing strategy to divest non-core midstream assets and focus capital in the company’s highly productive upstream business,” he said. WBI Energy Services—a subsidiary of MDU Resources—also sold its stake in the

gathering lines and the processing facilities. Earlier in the year, MDU Resources sold its stake in the Dakota Prairie Refinery to Tesoro. In May 2012, WBI bought its stake in the Pronghorn facility for $66 million but through its sale to Tesoro it will earn roughly $100 million.

YEAR-BY-YEAR BAKKEN INVESTMENTS: 2014: Tesoro Logistics acquires midstream business and ownership interest in QEP Field Services Co. in transaction valued at $2.5 billion. 2015: Through deal with crude oil logistics-provider Great Northern Midstream, Tesoro purchases pipelines, gathering systems, transportation, storage and rail loading assets in the Williston Basin. 2016: Tersoro Corp. purchases ownership and control of 20,000-barrelper-day Dakota Prairie refinery in western North Dakota. 2016: For $700 million, Tesoro Logistics acquires gathering pipeline infrastructure and two natural gas processing facilities in heart of Bakken oilfields.

PROJECTIONS FOR THE NEWEST ASSETS: In 2017 and 2018, the processing facilities will treat between 125 mmcf/d to 140 mmcf/d. In 2017, 15 mbpd of crude oil will be moved and, in 2018, 25 mbpd is the projection.

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

BAKKEN NEWS

Offshore oil, gas lease plan leaves Alaska senators infuriated Alaskan Sens. Dan Sullivan and Lisa Murkowski are not happy with the U.S. Department of the Interior’s release of a proposed five-year plan for offshore oil and gas leasing near Alaska and the Gulf of Mexico. The plan, created after receiving 3.3 million public comments, includes 11 potential oil and gas leases offshore, one of which is located near Alaska. Not included in the program were the Beaufort and Chukchi Seas, two areas that Sullivan and Murkowski worked to get included in the lease offerings. “President Obama is well-aware that the vast majority of Alaskans want OCS development, and I’m infuriated that he has once again ignored our voices to side with factions who oppose it,” Murkowski said. Abigail Hopper, director of the Bureau of Ocean Energy Management, said the plan was created through stakeholder engagement and the best available science. “The proposal makes available more than 70 percent of the economically recoverable resources, which is ample opportunity for oil and gas development to meet the nation’s energy needs,” she said. Earlier this year, DOI chose to take off the Atlantic as a possible location for offshore drilling. Areas off the Pacific coast are also not included in the 2017 to 2022 program, because, according to DOI, it is consistent with the long-standing position of the Pacific coast states in opposition to oil and gas development off their coasts.

OFFSHORE OIL PRODUCTION LIMITED: For the next five years, two major oil and gas development areas located on federally-owned areas off the coast of Alaska will be off limits. The main production for OCS will take place in the Gulf of Mexico. PHOTO: BUREAU OF OCEAN ENERGY MANAGEMENT

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BAKKEN NEWS

Wolfcamp play assessment puts Bakken at No. 2 all-time largest

CORE TRUTHS: USGS scientist Sarah Hawkins, lead scientist for the Mancos Shale assessment, examining a core drilled by the USGS Core Research Center. The USGS continues to perform such research due to advances in technology and capabilities of industry.

The Permian Basin’s Wolfcamp shale has officially overtaken the BakkenThree Forks shale as the largest continuous oil formation ever assessed by the U.S. Geological Survey. Three years after the USGS released data on the Bakken detailing its 7.3 billion barrels of oil total, the Wolfcamp shale, located in the Midland Basin portion of the greater Permian Basin, was assessed to have 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas and 1.6 billion barrels of natural gas liquids. Walter Guidroz, program coordinator for the USGS Energy Resources Program, said that the recent assessment shows that even in areas where billions of barrels of oil have been produced, “there is still potential to find billions more.” The assessment is not a new dis-

covery in the Permian, but rather acts as an official recognition of the massive amounts of oil in the area of West Texas that are now economically recoverable through new technology based on horizontal drilling. According to the USGS, the Wolfcamp has been a part of the Wolfberry play since the 1980s and was treated with traditional vertical well technology. Since the advent of horizontal drilling, more than 3,000 horizontal wells have been drilled and completed in the Midland Basin’s Wolfcamp. “Changes in technology and industry practices can have significant effects on what resources are technically recoverable,” Guidroz said, “that’s why we continue to perform resource assessments throughout the United States and the world.”

PHOTO: US GEOLOGICAL SURVEY

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BAKKEN NEWS

The Word From Texas, Oklahoma The Federal Reserve Banks in Kansas City (which includes Oklahoma) and Dallas issued a survey to oil and gas entities on their moods, expectations and general sentiments on everything oil-or gas-related, ranging from prices needed for drilling to job demand. For the first time in two years, respondents in Oklahoma reported rising business activity and revenues. In Dallas, operator participants as well as service providers, said they were bullish on industry activity for 2017. But, that’s not all each group had to say on their respective regions.

Oklahoma

OKLAHOMA

Price needed for drilling and well completion activities to rise: $53/b. Q3 2017: The date when global oil inventories will balance. “We expect a significant increase in 2017 capital spending as long as we have access to debt and equity markets at rates justifying accretive returns,” a respondent said.

Texas

“We need to replace reserves in order to maintain our borrowing base,” another survey participant said.

TEXAS

62 percent of all respondents expect oil prices to rise in 2017. Price needed for drilling and completion activity to increase: $50/b to $55/b. Main challenges to ramping up: worker shortages and access to capital “There is paralysis from analysis that prevents rational deployment of capital,” the survey respondent added. “Service cost inflation will have to happen, but it will also serve to help support price increases as service capacity will be unable to keep pace with demand increases.”

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TELLING THE BAKKEN'S True Story Dakota Access Pipeline protests teach the industry lessons about communicating. By Patrick C. Miller

The ability to effectively communicate in the age of the internet and social media was vividly demonstrated on Nov. 8 when Donald Trump tweeted his way to the White House, directly contradicting the predictions of media pundits, pollsters and political experts alike. Events in North Dakota surrounding the Dakota Access Pipeline (DAPL)—which ballooned from a local protest to a news story of international prominence—are just as mystifying to those in the oil and gas industry who work with the news media to communicate key messages to the public. “It’s been difficult because everyone wants to know what’s coming next for the pipeline,” says Tessa Sandstrom,

communications manager for the North Dakota Petroleum Council. “It’s hard to talk factually when there’s so much emotion involved. It’s definitely a little bit different than a lot of situations.” Rob Lindberg, head of an organization called the Bakken Backers—a coalition of North Dakota businesses, leaders, workers and citizens who support oil and gas development in the Bakken—believes the issues related to DAPL demonstrate that the state’s oil and gas industry needs to understand how it’s perceived outside of North Dakota’s borders. “We run into a general communication error in that we tend to—as industry—talk really well where we live and operate, but we don’t talk to the rest of the world,” he says. “So where there’s an

CROSSHAIRS ON PIPELINES: Environmental activist groups opposed to petroleum production in the U.S. have made pipelines such as the Dakota Access and Keystone XL the focus of their efforts. They've also targeted existing crude pipelines for shutdown. PHOTO: THE BAKKEN MAGAZINE

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

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oil well or a pipeline, we need to start having people on the ground or targeting social media posts to those sorts of places.” One person who has been active in championing the oil and gas industry is Kathy Neset, president of Neset Consulting Service in Tioga and chair of the State Board of Higher Education. Her name has become synonymous with helping the public understand the uniqueness and importance of the Bakken. Neset cites the NDPC’s Oil Can outreach and education program and the Bakken Backers as communications efforts that have been successful within the state. “They’ve really made an effort to reach out to communities, teach people and hold forums and town halls and such,” she says. “People in North Dakota took ownership of it. We go out to the communities and the rooms are usually full—people here want to learn.” However, she stresses that if the industry doesn’t tell its story beyond North Dakota’s borders, somebody else will. “Nine times out of 10, it is not going to be your true story,” Neset notes. “Nobody knows the story better than we do. We are the ones who live it, eat it and breathe it. No one person can do this. It has to be a united effort, and it has to have the importance put on it that the Dakota Access Pipeline issue has shown it deserves.” Lindberg agrees and adds, “You can’t spread a message without any allies. A lot of companies are starting to wake up to that and be a little better, but it’s a long road ahead for it to happen.” Neset believes the DAPL protests should serve as a catalyst to change the way industry communicates on a national level—to become more proactive and less reactive. “The way you do that is that you come together and you work together,” she explains. “Upstream, midstream and downstream companies are going to have to unite their voices and their message because what’s happening now is somebody else is telling our story for us, and that’s not the truth. The truth needs to be told by the participants.” Lindberg points out that the controversy surrounding DAPL was largely the confluence of events fueled by organizations with anti-industry agendas which made the issue difficult for anyone to accurately predict. “The level of protest organizations around DAPL is unprec-

INFRASTRUCTURE & CONSTRUCTION

edented for North Dakota,” he notes. “We went from 200 people in early August to several thousand. No one could have predicted that this would happen at this spot. If anyone would have guessed, they would have said Iowa.” Lindberg explains that an unusual aspect of the storm surrounding DAPL was that four different factions of government were involved—county, state, federal and tribal. “The situation of different governments at this pipeline site along Lake Oahe really has allowed the whole action to happen,” he says. “You have a tribal government, the federal government owning the land that the protesters camp on and then you have private land surrounding it all that’s largely governed by the county and the state. You also have the Obama administration that won’t enforce anything on federal land.” Getting critical information to the public about the technologies employed to keep the pipeline safe while protecting the environment has been a challenge, according to Sandstrom. “A lot of people don’t even know that the pipeline will go into the ground 90 feet below the river. They aren’t aware of technologies that exist now to prevent spills—the shutoff valves, the monitoring that will go into it, the fact that it’s double-lined, that it’s inspected,” she says. “There are a lot of things that haven’t been shared about the construction technologies that are going to be implemented with this pipeline.” Lindberg also notes that there are powerful groups behind the scenes backing the protesters who advocate the “keep it in the ground” position on oil and gas production. “It's important to remember, too, that the anti-energy organizations aren’t some sort of purely grassroots effort,” Lindberg says. “It’s a half-billion-dollar-a-year industry. They have professional operations to put misinformation out and create their own stories. Operators of pipelines or energy producers tend to just want to go and get the job done without a lot of fanfare. The opposition wants to create as much drama as they can.” Indeed, Kelcy Warren, chairman and CEO of Energy Transfer Partners LLC, the Dallas-based company building DAPL, issued a memo in September after protests became national news saying, “… our corporate mindset has long been to keep our head down and do our work. It has not been my preference to engage in a media/PR battle. However, misinformation has dominated the news, so we will work to communicate with the government and media more clearly in the days to come.” Neset agrees that what’s happened with the DAPL project illustrates the need for industry to anticipate controversy and address issues before they spin out of control. “The industry needs to realize that even when you follow the process, follow the rules of law and go through the proper channels, a project can still be uprooted and disrupted,” Neset says. “It comes down to companies prioritizing how important it is to educate people.” Sandstrom outlined NDPC’s efforts to communicate with the state’s residents, which range from educational seminars for teachers, public information sessions tailored to individual communities and a variety of events—such as the Bakken Rocks CookFest—and chari-

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table activities. She notes that they all provide opportunities for residents to pose questions directly to those working in the state’s oil and gas industry. “In the past, it’s been the Bakken basics focused drilling, hydraulic fracturing and the development process,” Sandstrom says. “As we’ve gotten further into the development phase, we’ve tailored our information to match community interests.” For example, NDPC held a meeting in Stanley to discuss pipelines and the processes in place to ensure proper remediation and address any leaks or incidents that might occur. The organization told residents about the response in the event of a spill in Lake Sakakawea and what industry was doing to protect the lake. “We covered the advantages of pipeline development in terms of getting trucks off the roads and reducing congestion on the rails,” Sandstrom says. While the NDPC can provide general information on topics related to the routing of pipelines, landowner rights, safety measures and environmental protection, Sandstrom says the organization usually can’t speak on behalf of the companies or government entities responsible for a specific project. “We don’t get overly involved in that,” she says, “but we have been trying to increase the amount of information we’re getting out there in terms of pipelines and in terms of oil and gas in general in the economy and all the projects in our everyday lives.” Sandstrom notes that in the battle over DAPL, social media—Facebook, YouTube and other sites—have been used to create misconceptions that once started are difficult to counter. “The biggest impact communicationswise that I’ve seen is that a lot of people are getting information from social media,” she says. “Whether that’s correct or not, it’s typically been taken as gospel. That’s led to a lot of frustration and misunderstanding.” Neset says that in addition to becoming more effective at social media, the oil and gas industry might want to reconsider its approach to communications. “Should that approach be led, fostered or coordinated in a different way?” she asks.

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

“I think it should because the current process doesn’t appear to be working very well. We have some communications gaps, and that’s a huge understatement.” Neset believes it’s a matter of prioritizing the message and understanding the audience at which it’s aimed. “If your audience is at a town hall meeting in Mohall, North Dakota, that’s a pretty savvy audience,” Neset says. “They know the oil and gas industry and they want to know more because they live it. “A young Wall Street entrepreneur— someone who’s only heard tales of what North Dakota’s oil and gas industry is doing—will have a very different perspective based on falsehoods and hearsay,” she explains. “It’s really knowing your audience and prioritizing this issue of communication. Messaging is very, very important.” As Donald Trump and his tweets proved, life sometimes imitates art. In a scene from the movie “O Brother, Where Art Thou?”—a work of fiction set in Mississippi during the 1930s—a candidate for governor explains why he no longer feels the need to “press the flesh” with individual voters. While entering a radio station to broadcast a campaign speech, he declares, “We ain’t one-at-a-timin’ here. We’re mass communicating!” By the end of the movie, what saves the candidate’s flagging campaign isn’t his use of radio to reach voters. It‘s his timely exploitation of a wildly popular singing group comprised of three escaped convicts—made famous by the mass audience they reached through radio. The message became more important than the technology used to convey it. “There is no standing still,” Neset emphasizes. “Whether it’s the technology, whether it’s our messaging, whether it’s our communications, if you stand still, somebody’s passing you. You have to keep moving forward or you are falling behind. Right now, the industry is falling behind in its efforts to educate and communicate with the rest of the world.” Author: Patrick C. Miller Staff Writer, The Bakken magazine 701-738-4923 pmiller@bbiinternational.com

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EXPLORATION & PRODUCTION

EXPECTED SCENERY: As the worldâ&#x20AC;&#x2122;s largest drilling rig fleet operator, Nabors Industries said it has developed a 2017 growth plan no matter how the oil price recovery unfolds. PHOTO: THE BAKKEN MAGAZINE

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

EXPLORATION& PRODUCTION

Glancing at 2017

BAKKEN ACTIVITY EXPECTATIONS Short updates from major Bakken operators and drilling rig providers By The Bakken magazine staff

Operators plan increased activity Enerplus plans a larger Bakken spend, including additional drilling rigs

Enerplus Corp. will increase its North Dakota oil production by 25 percent next year. Of the $400 million the exploration and production company intends to spend next year, 70 percent will be spent in North Dakota. By the end of January, Enerplus will add another drilling rig to its Fort Berthold operations. Enerplus has also secured a pressure pumping contract for the entire year. “Our efforts to improve the resiliency of our business and increase our margins have delivered meaningful results,” said Ian Dundas, president and CEO of Enerplus. “We remain on track to reinitiate profitable and sustainable growth in 2017.”

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Enerplus’ Bakken Crude Oil Discount to WTI US$/bbl

BAKKEN BASED: With $400 million budgeted for all of its operations in 2017, Enerplus will spend roughly 70 percent in North Dakota. SOURCE: ENERPLUS CORP.

BEST DRILLING TECH IN DEMAND: In the Bakken, Precision Drilling is operating multiple Super Triple walking rigs capable of drilling long-reach laterals. PHOTO: THE BAKKEN MAGAZINE

Marathon adds Bakken rig ahead of sequential growth plan

to 20 percent within cash flows at flat $55 WTI,” said Lee Tillman, president and CEO. According to Tillman, the macro environment for oil and gas production To achieve quarterly sequential in 2016 is “transitional, volatile— growth in its North American but still with opportunities.” resource plays during the latter half of 2017, Marathon will add Continental to focus a single drilling rig to its North on completing Dakota operation at the end of 2016. “While our planning pro- Bakken DUCs cess is underway, our preliminary The plan in early 2017 for Confive-year view for resource play tinental Resources is to work production supports a com- down drilled but uncompleted pound annual growth rate of 15 Bakken wells. Next year, the 22

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

certain environment for both oil prices and global demand, CEO Rex Tillerson believes there will always be new opportunities for entities in the oil and gas business. “What most commentators on peak oil were unwilling to acknowledge was the record of this industry to develop and adopt new technologies that would change that future of diminishing supply,” he told a crowd at a London oil and money event. “Those of us who dismissed the peak oil theories weren’t any more prescient in our ability to forecast the future—we just held a different view shaped by our experience in this industry of innovators,” adding that, “for ExxonMobil sees those of us who take a long term new opportunities view—and for companies able to ExxonMobil’s perspective on the create value through the cycle— oil and gas industry heading into there will be new business oppor2017 is linked to the company’s tunities.” view on the past. Despite an un-

Oklahoma-based exploration and production company will complete at least 29 wells in the Bakken, in addition to 33 in the SCOOP play and another 32 in the STACK play of Oklahoma. The budget for 2017 should total roughly $1.1 billion. The push to complete DUC wells stems, in part, from the company’s new completion design, according to Harold Hamm, CEO. The designs rely on heavier sand loads and increased frack stages and have resulted in two wells that generated record 30-day initial rates for Continental-operated Bakken wells in 2016.

EXPLORATION& PRODUCTION

ConocoPhillips has changed its plans for 2017 due to unforeseen production increases and recovery rates from its Bakken operations. Although the company intended to add drilling rigs to the Bakken in early 2017, the world’s largest independent exploration and production company has instead moved up its drilling rig ramp-up time line. In late 2016, ConocoPhillips added three rigs to the Bakken. “We continue to get better recoveries and better production for longer from these wells,” said Al Hirshberg, executive vice president for drilling and projects. “So it’s all about well performance, and better IPs and slower decline rates than what we had put into our plans back when we set up the budget a year ago.” The improved char-

acteristics of its Bakken operations pushed the team to secure drilling rigs and pressure pumping crews earlier than its originally scheduled plans for 2017.

Hess optimistic but waiting to release 2017 plan

Despite production decreases in the Bakken during 2016, John Hess, CEO of Hess Corp., remains optimistic about the Bakken. Oil price improvements in late 2016 were enough to persuade the exploration and production firm to make initial preparations for increased drilling operations in the Williston Basin in 2017. Although Hess will not divulge the extent of its drilling rig plans for 2017 until well into Q1 of next year, the company did offer perspective on where the Bakken stands in relation to its overall plans. “Our

Average MRO Operated Well Cum Production 160

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BETTER RESULTS, DIFFERENT PLAN: New completion designs deployed in the second half of 2016 have helped increase Marathon’s Bakken and Three Forks production. The designs, while still being tested, will be used in 2017. SOURCE: MARATHON OIL CORP.

Bakken team continues to offer excellent operating results and returns in the core of the play that are competitive with the Permian and Eagle Ford,” Hess said. “Our high-quality Bakken acreage, industry-leading drilling

and completion costs, and advantaged infrastructure position set up our Bakken assets to be a major contributor to the company’s future production and cash flow growth.”

Drilling Rig Providers Experiencing Transformation Nabors sees rig utilization increases

unfolds, Nabors expects its reduced cost structure, improved performance and various techNabors Industries, owner of the nology initiatives to significantworld’s largest land-based drill- ly increase operating leverage ing fleet, is experiencing a trans- across its global fleet. formation amongst its North American and international clients. “After a challenging down- Precision Drilling turn, we are experiencing signifi- experiencing best cant utilization increases in our customer sentiment Lower 48 market,” said Anthony in past two years Petrello, president and CEO of Precision Drilling Corp.’s PresiNabors. “Similarly, our internadent and CEO Kevin Neveu tional markets are showing signs said North American customer of impending activity increases.” sentiment has turned substanAnd, according to Petrello, retially compared to any other gardless of how the recovery time in the past two years. “I

believe that all of our customers are investigating adding rigs in 2017,” he said, adding, “this is the first time our customers are even talking about increasing activity and adding rigs, not how quickly they can lay rigs down.” Although investors and clients continue to ask about potential staffing issues, Neveu said finding drilling rig employees will not be and has not been difficult. In October, Precision added 1,000 rig workers and according to the company, keeps a list of roughly 1,200 possible hires in a database at all times. The majority of Precision rigs under contract

today are the most advanced offered by the company. In many cases, clients are contracting for rigs that can drill super laterals—18,000 feet—even though they do not intend to drill to that lateral length. “Here we are right now just coming out of the trough of the worst cycle in a couple decades and we are talking about 18,000 foot horizontal sections, so even in this really tough environment, customers have a willingness to try things that could potentially increase capital efficiency.”

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IN PLAY

A GATHERING OF DIGNITARIES: North Dakota Attorney General Wayne Stenehjem addresses industry leaders, state officials, students and faculty during the dedication of the renovated Wilson M. Laird Core and Sample Library on the University of North Dakota campus. PHOTO: THE BAKKEN MAGAZINE

Wilson M. Laird Core and Sample Library ready for Bakken 2.0 The Core library expansion will give current and future geologists a better chance to discover the next Williston Basin. By Patrick C. Miller

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2016

The Wilson M. Laird Core and Sample Library that played a direct role in helping North Dakota become the No. 2 oil producing state in the nation has undergone a major renovation and expansion that will keep it relevant for the oil and gas industry. “This lab is about the future,” said Kathy Neset, president of Neset Consulting Service in Tioga and chair of the State Board of Higher Education. Government officials, oil and gas industry representatives and students and faculty from the University of North Dakota were in Grand Forks Sept. 27 to dedicate the expansion of the Core and Sample Library. Built on the UND campus in 1980 and named after Laird, the man who served as North Dakota’s state geologist from 1941 to 1969 and chaired UND’s geology department for 28 years, the

IN PLAY

18,000-square-foot warehouse provided storage space for samples and cores collected from nearly every well ever drilled in the state—dating back to before oil was discovered in 1951. The facility included office space and a lab where industry geologists and UND faculty and students could study the rock. In outlining Laird’s vision and his impact on UND and the oil and gas industry, Wayne Stenehjem, North Dakota attorney general, noted that some states don’t have core libraries or extensive core sample collections. “All that history tells a valuable lesson to all of us about the importance of foresight and a vision for the future,” he said. Eleven years ago, discussions to expand the facility began when it became apparent that increasing oil and gas activity would eventually outpace its storage capacity. In 2013, Gov. Jack Dalrymple and the North Dakota Legislature authorized a $13.6 million expenditure from the state Strategic Investments and Improvements Fund to add another 28,000 square feet of storage space, as well as improvements to labs and offices. Spencer Wheeling, a UND doctoral student in geology, explained how the expanded facility benefits his research on mapping the Red River formation. Previously, there was only one small lab in which to study the cores and samples. That meant students had to pack

up their work and leave when others needed the lab. Now there are three large labs, one devoted entirely to student research. “My dissertation project is related directly to a lot of these cores,” Wheeling said. “I have to look over 250 or so cores just to focus on the project that I’m doing. That’s probably one of the greatest improvements from a student aspect. The labs used to be scattered around campus, but now they’re consolidated right here. The microscope and computer labs are just right down the hall.” Mark Sonnenfeld, vice president of geoscience for Whiting Petroleum, commended core library director Julie LeFever—author of research articles that led to industry interest in the Bakken formation—and her staff for their knowledge and service-oriented approach. “Having viewed core at repositories throughout the country—both public and private—we experience a higher degree of professionalism here than anywhere else, including a willingness to adapt core layout plans on the fly,” he said. Jack Stark, president and COO of Continental Resources, said the research resource provided by the core library and lab aided in developing a template for tight-oil exploration and production in North Dakota, which also resulted in a new class of reservoir. “Literally, this reservoir has made the U.S.

ROCK OF AGES: The core and sample library at UND provides facilities for industry geologists, researchers and students to study Williston Basin core samples. PHOTO: THE BAKKEN MAGAZINE

as a swing producer of oil, dissolved OPEC as we knew it and created an energy renaissance that’s put the U.S. on a path to energy independence,” he noted. “When you get down to it, this lab is at the center of that world-changing event.” Noting that the fund was created for longterm infrastructure improvements and funded from state oil and gas royalties and tax revenue, Dalrymple said, “This was a perfect source of funds. What a great investment for the people of North Dakota.”

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