August 2013- The Bakken by BBI International

AUGUST 2013

Transforming Supply The First Rail Pipe Transloading Facility and Why It Makes Sense Page 36

Plus:

Data From Three Forks Formation Will Help EERC Reveal Play's True Potential Page 24

AND:

Secrets of the Invoice Factoring Process Page 40

Success on the Recruiting Trail Page 38

www.THEBAKKEN.com Printed in USA

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CONTENTS

AUGUST 2013

VOLUME 1 ISSUE 5

DEPARTMENTS

IN PLAY

34 Launching into the Shale Business

Bart Sweazea, a Texas-based career oil-man shares his story of starting a Bakken-focused E&P company and why the shale drilling industry is a great place to be. BY STAFF

MAKING IT

36 Improving the Pipe Supply Chain

Savage demonstrates the power of service bundling at the Bakken’s ﬁrst rail pipe transloading facility in Trenton, N.D. BY STAFF

HIRED

Pg 18 CONSTRUCTION AND INFRASTRUCTURE

Putting The Strata Way To Work

Strata Corp. shares 103 years of business strategy and how the concrete and aggregate provider is expanding in the Bakken. BY LUKE GEIVER

38 Staﬃng Insight

Third-party headhunters and internal recruiters are overcoming challenges to ﬁnd or place the best candidates. BY STAFF

CONTRIBUTION

40 Operational Financing Helps Bakken Businesses Explore Opportunities The beneﬁts of the invoice factoring process. BY TCI BUSINESS CAPITAL

Pg 24 EXPLORATION AND PRODUCTION

Redefining the Bakken With the help of the play’s largest producers, the Energy and Environmental Research Center is taking on Three Forks Formation and operational eﬃciency research. The results could reveal the Williston Basin’s true oil resource potential. BY LUKE GEIVER

AUGUST 2013

6 Editor’s Note

Using Big Numbers to Answer Bakken Questions BY LUKE GEIVER

8 N.D. Petroleum Council

Take Safety into Your Own Hands: Take the No Pass Pledge BY TESSA SANDSTROM

Transforming Supply The first rail pipe transloading facility and why it makes sense Page 36

Plus:

Data from Three Forks Formation will help EERC reveal play’s true potential Page 24

AND:

Secrets of the Invoice Factoring Process Page 40

Success on the recruiting Trail Page 38

www.THEBAKKEN.com Printed in USA

ON THE COVER: Savage's new facility will bundle pipe threading, storage and transloading. PHOTO: SAVAGE

10 Bakken News

Bakken News And Trends

THEBAKKEN.COM

EDITOR'S NOTE

Using Big Numbers to Answer Bakken Questions Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

The Bakken oil and gas retrieval eﬀort is bigger than any individual E&P firm trying to extract crude, rail company trying to move tubular goods or food truck attempting to sell out. And, after picking the brain of one of the play’s leading researchers, I feel safe in saying the Bakken may actually be larger than any of us have ever imagined. For this month’s feature on exploration and production, I had the opportunity to sit down with the Energy & Environmental Research Center’s John Harju and learn about a new research effort his team is tackling. The work will combine $115 million in state funding with the well data and geological logs from some of the play’s largest producers. The goal of the work is to create a three-dimensional model of the Three Forks Formation’s four benches and the Middle Bakken bench. The work will also address ways to increase operational efficiency while reducing flaring and water use. According to Harju, the work is justified and will help reveal something everyone should know: the recoverable oil in the play could be 40 billion barrels, not the 7 billion barrels previously estimated by the U.S. Geological Survey. While most of us may not be geology experts or have Harju’s or his team’s depth of knowledge, we know big numbers when we see them. The work will provide a visual to the state on how to best manage and develop the resource while demonstrating this play is a multiple-decade situation for oil production and economic vitality. Or as Harju says, the work proves that big oil fields just get bigger. Strata Corp., a North Dakota-based concrete, aggregate and materials supplier, may not know about the geological discrepancies of the Williston Basin, but it does understand the basics of economic vitality. The company has been around for 103 years. To establish itself as a longterm provider of quality services and materials suitable for well pads and roads in western N.D., the company has deployed its employee-centric business model with great success. The key to the company’s success can be found in this month’s second feature. After reading the piece, if Strata’s approach to employee satisfaction and investment strategy doesn’t seem to resonate as a blueprint for long-term Bakken success, ask this question: How many companies in the Bakken have been around for a century? Better yet, how many companies anywhere have been around for a century? And, because the answer to that is fairly easy, here is one last question. Based on the research implications of Harju and his team’s work, how many multi-decade companies will the Bakken create?

The BAKKEN MAGAZINE AUGUST 2013

ADVERTISER INDEX

www.THEBAKKEN.com VOLUME 1 ISSUE 3

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20/20 Properties LLC

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AgriData, Inc.

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ASC Construction Equipment

Bakken Artiﬁcial Lift & Production Conference

Bakken Oil Workers & Oil Service Expo

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EDITORIAL Editor Luke Geiver lgeiver@bbiinternational.com Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com Staﬀ Writer Chris Hanson chanson@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, Sales & Marketing Matthew Spoor mspoor@bbiinternational.com

Dakota Modulars

Vice President of Content Tim Portz tportz@bbiinternational.com

Dakota Supply Group

E3 Environmental, LLC

Business Development Manager Bob Brown bbrown@bbiinternational.com Account Manager Tami Pearson tpearson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Marketing Director John Nelson jnelson@bbiinternational.com Advertising Coordinator Marla DeFoe mdefoe@bbiinternational.com

Empire Steel Manufacturing Company

Fairlight Medical Center

Felco Industries

Headwaters Resources

Highland Projects LLC

Jason Industrial, Inc.

Art Director Jaci Satterlund jsatterlund@bbiinternational.com

New Pig Energy

Graphic Designer Lindsey Noble lnoble@bbiinternational.com

Quality Mat Company

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14-15 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, Canada and Mexico. 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 866-746-8385 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.

Safe-T-Pull

Strata Corporation

TCI Business Capital Inc.

42 The Bakken Magazine 3

TouchStar

Water Solutions

Wells Concrete

Please recycle this magazine and remove inserts or samples before recycling

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NORTH DAKOTA PETROLEUM COUNCIL

Take Safety into Your Own Hands: Take the No Pass Pledge BY TESSA SANDSTROM

The BAKKEN MAGAZINE AUGUST 2013

THE MESSAGE

“There are two seasons in North Dakota: winter and road construction.” It’s a familiar joke for many of us, and although all North Dakotans revel in our beautiful summers, there are some years when the winters are tough and the springs are long and rainy. It is these years that this quip seems to be more of an adage than just a joke, and this year was one of them as late snowstorms and heavy rains delayed road construction projects and waterlogged gravel roads in western North Dakota. Summer is finally here, however, and construction crews are busy putting to use the more than $1.5 billion of funding for repairing and rebuilding roads passed by the state legislature, which included $620 million that was fast-tracked

NORTH DAKOTA PETROLEUM COUNCIL

Truckloads Needed for a New Bakken Well through the legislative session and passed by the governor in February to be used immediately for improvement projects. The funds will be used on major highways in western North Dakota, including for continued construction to convert U.S. Highway 85 between Watford City and Williston into a four-lane highway; roadway improvements along U.S. Highway 2; roadway reconstruction on portions of N.D. Highways 2 and 8; roadway improvements along N.D. Highways 22, 1804 and 1806, and resurfacing on U.S. Highway 52. These repairs and improvements are no doubt necessary, but they will bring with them more traffic and delays on our busy roads. These added nuisances will make it more important than ever to practice safe driving habits. The North Dakota Petroleum Council, North Dakota Department of Transportation, North Dakota Highway Patrol and North Dakota Motor Carriers Association are again partnering in a public awareness campaign to promote traffic safety in western North Dakota. This “Moving Forward Safely” campaign urges motorists driving in oil country to be patient and exercise caution while traveling. To help educate drivers and keep motorists safe, the campaign focuses on the following key messages: "Pass with Caution.," "Be Patient. Slow Down.," “Roads Shared. Lives Spared.” and “Buckle Up. Every Time.” By following these tips, many crashes can be prevented and lives can be saved. This year, we are asking motorists to take safe driving a step further. Too often when traveling through oil country, we see motorists making unwise decisions to pass, only to have those same vehicles catch up with them at the next hill or intersection. The perceived benefit of getting to a destination sooner by passing on our busy roadways does not outweigh the risks of putting your and others’ lives in danger. For this reason, the staff and many members of the Petroleum Council have taken a “No Pass Pledge” when traveling in western North Dakota, and we urge you to join us. Oil country will continue to be a work in progress for the next few years. While industry is taking steps toward reducing truck traffic by building pipelines, it’s still important that we consider increased traffic on our roads. We all share a responsibility to make sound, cautious decisions when we drive. Remember that everyone –from farmers to truck drivers to families – is trying to reach their destination safely. The additional traffic makes doing so require a little extra time, but it is an easy thing to plan for. The solution for most traffic safety issues lies with each individual driver. Use caution and avoid distractions. Be patient and share the road. Take the No Pass Pledge and urge your loved ones to do the same. These steps will help make our roadways a safer place to be. North Dakota is a ProgressZone, and while construction continues to improve our infrastructure for future growth, we can take safety into our own hands and help keep North Dakota moving forward safely. Author: Tessa Sandstrom Communications Manager, North Dakota Petroleum Council 701-557-7744 tsandstrom@ndoil.org

Location & Production Preparation

Drilling Preparation

Drilling Phase

Rig Down

Fracturing Phase

Production Equipment Move

Pit Reclamation Production Phase: 3 trucks per day in year 1, 1 truck per day in year 2, 0 = 10 trucks loads trucks if pipelined SOURCE: NORTH DAKOTA DEPARTMENT OF TRANSPORTATION

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BAKKEN NEWS

BAKKEN NEWS & TRENDS

2012 Global Well Completions United States: 45,468 Rest of World: 3,921

DRILLING-INTENSE NATURE: In his shale oil study, Leonardo Maugeri said replicating the Bakken’s shale development success will be difficult based on the need for intense drilling operations, a demand of shale energy production that only the U.S. can supply. PHOTO: STATOIL

The Shale Oil Phenomena Shale oil exploration and production teams are like guerilla groups capable of moving from project to project quickly while leveraging multiple skill sets, according to a new study released by former oil executive Leonardo Maugeri. The study, “The Shale Oil Boom: A U.S. Phenomenon,” examines the potential of U.S. shale oil development, including information that explains why guerilla-style operations are good for the Bakken. In his study, Maugeri asks, and attempts to answer the question: Is oil production from shale just a temporary bubble or is it an event capable 10

of significantly altering the U.S.— and possibly global—energy outlook? Maugeri analyzed 4,000 shale oil wells and more than 100 oil production firms in the U.S., revealing that the U.S. could become the largest global oil producer in only a few years. The combination of shale oil’s vulnerability to oil prices and the amount of drilling required to consistently produce at high volumes could hinder the growth of shale oil production, however. The presence of production firms focused on small retrieval projects made up of only a hand-

The BAKKEN MAGAZINE AUGUST 2013

ful of wells makes it possible for quick operational changes if the price of oil negatively impacts the profits of shale energy production, the report explains. Success in shale plays such as the Bakken and Eagle Ford won’t happen in other parts of the world, the report adds. “The central role played by drilling intensity in this early stage of shale oil and gas development has a crucial but almost unnoticed implication for the possibility of replicating the success of the American experience in other parts of the world,” Maugeri said, adding that no other country in the world

has ever experienced a fraction of the overall drilling intensity happening in the U.S. In 2012, the U.S. completed 45,468 oil and gas wells with 28,354 of those wells coming online while the rest of the world completed 3,921 wells. The drilling-intense nature of the shale business will make expansion in other parts of the world improbable, he said. And, the absence of private mineral rights in most other countries outside of the U.S. will make replicating the success in the Bakken difficult to replicate.

BAKKEN NEWS

ND Leads in Housing Development Top 10 Counties by Housing Growth Percentage Increase Rank Geography

Housing Unit Estimate

Change, 2011 to 2012

2011

2012

Number

Percent 13.9

United States 1

Williams County, North Dakota

10,968

12,493

1,525

Ward County, North Dakota

27,521

28,839

1,318

4.8

Sumter County, Florida

55,660

58,035

2,375

4.3

Hays County, Texas

61,977

64,333

2,356

3.8

Fredericksburg City, Virginia

10,836

11,216

380

3.5

Grand County, Utah

4,847

5,009

162

3.3

Bryan County, Georgia

12,069

12,457

388

3.2

Stark County, North Dakota

11,055

11,399

344

3.1

Morton County, North Dakota

12,226

12,596

370

3.0

Fort Bend County, Texas

203,027

208,444

5,417

2.7

In 2012, North Dakota led every state in the country in new housing growth. While the nation averaged 0.3 percent housing growth, North Dakotaâ&#x20AC;&#x2122;s rate was two percentage points higher at 2.3 percent. Two counties located in the heart of the oil and gas play ranked first and second in the nation. Williams County recorded 1,525 new housing units for a percent increase from the previous year of 13.9 percent. Ward County recorded 1,318 new housing units for a 4.8 percentage increase from the previous year. The state as a whole produced 7,388 new housing units. Of the top 100 counties in the U.S., eight North Dakota counties were represented, six of which were in the top 25.

NOTE: Housing units lost consist of units with interiors exposed to the elements, demolished or moved.

2010 Census Housing Units

New Residential Construction

New Mobile Homes

Housing Units Lost

July 1 Housing Unit Estimate

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BAKKEN NEWS

National Climate Plan Calls For Reduced Flaring President Obama has issued a climate action plan that consists of three pillars: cutting carbon pollution, preparing the U.S. for climate change and leading the U.S. in international efforts to combat climate change. Part of his plan includes reducing methane emissions created during oil and gas development. Obama highlighted the work of the Interagency Bakken Federal Executive Group, which is made up of 12 government bureaus. The group has been attempting to streamline the permitting process for energy development, identify production efficiencies and reduce the amount of associated gas flaring that occurs during oil retrieval. “When it comes to the oil and gas sector, investments to build and upgrade gas pipelines will not only put more Americans to work, but also reduce emissions and enhance economic productivity,” the plan states. Due to the lack of available infrastructure needed to capture or move the resource, 15 to

The Basics of a Better Well

18 percent of all associated gas in the region is flared. Flare reduction isn't the only issue with which the Bakken working group has been tasked. The group, led in part by the U.S. Bureau of Land Management, is working to manage the development of Indian Trust lands and minerals. In 2012, the BLM approved 664 drilling permits, 418 of which were on Indian mineral leases. Since 2007, applications for drilling permits on the Fort Berthold Indian Reservation within the Bakken play have increased from zero to more than 400, according to the BLM. This year, roughly 900 applications are anticipated. Over the past five years, royalty payments, an aspect of energy production on federal lands managed by BLM, have increased from less than $1 million to more than $257 million. “The pace is not expected to let up,” the BLM said.

Bringing a Bakken well online in 2013 could take roughly 150 days or more, but key periods during that time frame can impact the success of the well more than any other. McAndrew Rudisill alluded to that during a recent drilling program update for Emerald Oil Inc. His statements help to show the importance of the approximate two-week period needed to hydraulically fracture a well. Rudisill, CEO of Emerald Oil, noted that results from three wells in McKenzie County, N.D., that all exceeded the company’s initial modeled type curve for the wells. “We are actively working on placing more proppant per frack stage in each of our wells because we believe proppant concentration per stage has a direct correlation with superior well results,” he said. “There is a lot to be gained from enhancing fracture stimulation design and we are working on refining this technology.”

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The BAKKEN MAGAZINE AUGUST 2013

BAKKEN NEWS

Governors Create Energy Blueprint The Western Governors Association believes the nation’s energy future runs through the West. The group has created what it believes can be an energy blueprint for the Western, and possibly the entire U.S. Made up of 22 governors, WGA has put together three documents to outline the available energy resources and energy needs in the region. Along with the assessment work done by the WGA, the group has also assembled essays and perspective pieces from each governor member. Two Bakken-linked governors wrote on the role of shale oil usage and development. North Dakota Gov. Jack Darlymple titled his perspective piece “Fossil Fuels Play a Critical Role,” and highlighted the numbers that have advanced and will advance

oil and gas production in the state. According to the North Dakota Industrial commission, he wrote, a typical 2012 Bakken well has an expected production life of 45 years and will produce 615,000 barrels of oil. Over the course of their production, each of these wells is expected to produce $20 million in net profit, pays $4 million in taxes, $7 million in royalties, $2 million in wages and $2 million in operating expenses. Because of those numbers, North Dakota will continue to pursue policies that support responsible development of crude oil and natural gas resources within the state, he wrote, adding, “We believe that energy development would be best served by a federal government policy that allows states considerable input and

control over the development of resources within their boundaries.” Those boundaries include activities such as hydraulic fracturing policy creation, he said, instead of a onesize-fits-all federal approach, “that doesn’t match the realities present in each state.” Montana Gov. Steve Bullock also addressed the role the Bakken will play in the state’s energy vision. In his piece titled, “Montana’s Energy Diversity A Regional Asset,” Bullock pointed to the opportunities and challenges his state has incurred due to the Bakken. The state has become, in part, a supplier of goods to the region. Transloading facilities bringing pipe and proppant to the Bakken play have created jobs. “Diesel mechanics, truck drivers, contractors and other occupations are in

Talking Points: 2012 Bakken Well 45 years of production 615,000 barrels of oil $20 million net profit $4 million in taxes $7 million in royalties $2 million in wages $2 million in operating expenses

short supply,” he wrote. At the same time, he also said, the influx of workers has strained the water infrastructure and resources of the state, an aspect of the play he hopes to continue to work on. The state has positioned itself to build infrastructure necessary to move products to market, he added. And, he hopes the state can better utilize the resources it currently has. According to Bullock, nearly 88 percent of crude oil refined in the state is piped in from Canada while Montana crude flows elsewhere.

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BAKKEN NEWS

Contractor Reports, Site Inspections Success The vast majority of construction sites in Minot, N.D., are complying with state licensing and reporting laws, according to a multi-agency Contractor Compliance task force put together by the N.D. Tax Commission. During a week-long inspection exercise, the task force inspected 28 job sites involving 194 contractors. Only seven contractors were not licensed. During inspections, contractors were given information about reporting requirements and asked to give information about employees. “By conducting these compliance checks we are able to address a couple of

important issues: first, as an educational opportunity to inform contractors and the public about their licensure and insurance responsibilities, and second, we can ensure that all contractors are paying the taxes that are due,” said Cory Fong, tax commissioner of the inspections. Wayne Stenehjem, N.D. attorney general, said the professionalism and cooperation by the contractors allowed the inspectors to visit such a large number of sites. “Our goal is compliance and a level playing field for licensed contractors, not legal action,” Stenehjem said.

Hydraulic Hose Assets Oilfield acres aren’t the only assets worth purchasing in the Bakken, to which the investment firm Colville Capital can attest. The firm helped Motion and Flow Control Products Inc.’s acquisition of Montana-based MD Hose & Fittings LLC. The purchase marks the entrance of MFCP into the Bakken as a fluid equipment, instrumentation and hydraulic hose service provider. “We are strong believers in the long-term strategic potential of MFCP and are very pleased to expand into the Bakken,” said Mark Mealy, managing partner at Colville Capital. MFCP consists of several companies, all created by

Colville Capital, including McCoy Sales in 2006, Fluid Connector Products in 2011 and American Hose and Fittings in 2012. MD Hose & Fittings is only three years old, forming in 2010. The newly named store will add service and repair of hydraulic hoses along with factory-trained personnel to help completions-based customers. “We are excited about the opportunities of joining MFCP,” said Randy Iverson, former owner and future branch manager of the Sidney, Mont., store, adding that “being a part of MFCP will allow us to expand our business and better penetrate the market in this key oil and gas market.”

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Marathon Oil: ND Trendsetter When Terry Kovacevich, regional vice president of Marathon Oil’s Bakken asset management team, accepted the Partnership Building Award from the North Dakota Association of Nonprofit Organizations at the organization’s yearly awards event this year, it was a first for Marathon Oil, the NDANO and the entire Bakken oil and gas play. Dana Schaar Jahner, executive director for NDANO, said the organization felt that there were organizations that didn’t classify as nonprofits that were advancing communities and deserved recognition. The group created the Partnership Building Award, looking for specific examples of community involvement and leadership. The nomination form for Marathon Oil was overwhelming, Jahner said. “The form included a long list of organizations that they worked with,” she said, including The United Way of Dickinson, Best Friends Mentoring Program, scouts programs,

FIRST-TIME POSE: Members of Marathon Oil accept the Partnership Building Award from Jim Yockim, NDNANO president (tan suit). PHOTO: NORTH DAKOTA ASSOCIATION OF NONPROFIT ORGANIZATIONS

the American Cancer Society, the American Lung Association and others. The form also included board positions or leadership roles taken on by the company. Jahner said next year’s award could be nearly any organization, for-profit, nonprofit or educational institution, but for another

Bakken-based firm to win, she had this to say, “I think it is really a matter of being engaged in the communities that they are living in and working in and helping to improve the quality of life,” she said, “not just by providing jobs.”

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BAKKEN NEWS

Toshiba-Houston Invests in Inventory Toshiba International Corp. is doing its part to make the Bakken a more efficient oil and gas play. The company’s Houston manufacturing facility has invested $20 million in a plant where low- and medium-term voltage adjustable speed drives are built. The units help control the speed and torque of electric

motors used to control pumping speeds and flow rates. “Over the last couple of years, TIC has had tremendous success with our mediumvoltage adjustable-speed drive product line in the oil and gas industry,” said Janet Rust, communications specialists for TIC. According to Rust, demand by drilling teams in the Bakken has made providing the variable speed drives to the Bakken difficult. But, following the plant’s expansion of 107,000 additional square feet, office space and an inventory surplus of the adjustable speed drives, TIC believes it will be able to reduce lead times for its products and meet the needs of what it considers a key market, the Bakken.

ALL CONDITIONS: The MTX medium-voltage drive is the only outdoor-rated drive in the world with ratings of 3,000 HP and 4,160 volts, making the unit popular in the Bakken. PHOTO: TOSHIBA INTERNATIONAL CORP.

The BAKKEN MAGAZINE AUGUST 2013

THE TOP: The trademarked T300MVi mediumvoltage drive is the largest air-cooled drive available in the market. PHOTO: TOSHIBA INTERNATIONAL CORP.

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CONSTRUCTION AND INFRASTRUCTURE

ADAPTING WELL: Four years ago, Strata added well site services to its business offerings, moving the company away from the bidstyle approach to the service world. PHOTO: STRATA CORP.

A BUILDING FOR BUILDING: The office faciility pictured here includes a massive shop and a second floor fit for executive offices. PHOTO: LUKE GEIVER

SERIOUS WORK: Steve Griffin, construction division manager, started as a civil engineer's assistant, but has helped grow Strata into a serious Bakken player. PHOTO: LUKE GEIVER

The BAKKEN MAGAZINE AUGUST 2013

CONSTRUCTION AND INFRASTRUCTURE

NO JOB TO WORRY ABOUT: The company has poured concrete at two N.D. U.S. Air Force base runways, along with many housing subdivisions and highways. PHOTO: STRATA CORP.

THE SUPPLY: Strata uses rail to bring in or move out aggregate from places such as Warroad, Minn. The company also recycles concrete product for future use. PHOTO: STRATA CORP.

Putting The Strata Way To Work Strata Corp. is using 103 years of experience to nurture its bursting Bakken business. By Luke Geiver

Strata Corp. isn’t the only concrete, aggregate or construction firm operating in the Bakken, but the North Dakota-based company does have one thing that perhaps no other Bakken businesses can claim: 103 years of service. “We are committed to our locations long-term,” says Steve Griffin, construction division manager and 36-year employee of the company. Since starting Bradshaw Gravel Supply, a gravel operation in Arvilla, N.D., in 1910, the Bradshaw family and members of the Strata team including Griffin, have helped to expand its reach into South Dakota, Minnesota and Montana. The company’s approach to maintaining a strong culture of employee satisfaction in comSERVICE WHEN NEEDED: Hazardous material work is a 24/7, 365-day per year job that the company began offering after recognizing the scarcity of remediation services in Western North Dakota. PHOTO: STRATA CORP.

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READY WHEN YOU ARE: To meet the demands of clients in Western North Dakota, Strata built a replica concrete ready mix plant in Williston, N.D., to match its Grand Forks facility. PHOTO: LUKE GEIVER

bination with strategies for longevity explains why Strata has found success in the Bakken and why other firms intending to operate in the play for decades should consider the Strata philosophy on oilfield business.

Reasons for Success The grounds at Strata’s eastern N.D. facility are situated within minutes of an interstate on-ramp and a highway that runs through the heart of the Bakken. A rail line that is capable of importing and exporting aggregate

and equipment runs through the north edge of the property. A multistory, ready-mix concrete plant sits in the middle of several massive stock piles of granite chips and other aggregate materials necessary for constructing buildings, well sites, roads and slabs. Rows of

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late model trucks are parked in a huge equipment parking lot, and a sophisticated building of corporate-style offices stands near the entrance of the multi-acre campus. According to Griffin, the company has needed all the facility has to offer, and more, to stay current with the demands of its Bakken clients. The company also has erected a replica of its Grand Forks, N.D., ready-mix plant in Williston and several other facilities scattered throughout Western N.D. that help it supply service and bid on jobs. The long list of Strata’s locations and equipment supply dedicated to the Bakken grew as a result of an extensive assessment and research effort by Griffin and others. “Before we moved into Williston we wanted to make sure we had the support available to service our customers,” he says. “We talked to each oil company we work for out there to ensure what they were looking for is what we could offer.” Those efforts have paid off, and now the company has been able to deploy its business strategies to the common problems addressed by every Bakken firm in the past five years: staffing, timeliness of service, housing, competing businesses and work-related travel. According to Julie Magnus, hiring coordinator and marketing director, Strata’s accomplishments can be traced back to the company’s pseudo-mantra that bragging and business hyping don’t secure current or future success––employee satisfaction and customer appreciation do. Magnus has been to every regional job recruiting fair over the past year, including a few in Arizona and Florida. Although many potential hires aren’t familiar with Strata, that 103 years of service combined with testimonial’s from current employees help to explain why a Strata job is worth applying for. “We offer stability others can’t in the state,” she says. “Our challenge is that there is the next business that might pay a few dollars more than what we might pay,” she adds. “What we like to say is you can jump ship and make a little more money but you won’t have the longevity that Strata has.” The average number of years for long-term employees is

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EMPLOYEE SATISFACTION: To maintain a superior fleet, Strata uses an eastern N.D. service facility to keep all trucks, including those in western N.D., at highperformance. When that level is no longer attainable, the company reinvests profits to buy new models. PHOTO: LUKE GEIVER

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FIELDWORK: At the Bakken Oil Workers and Oil Service Expo, Strata presented on remediation methods it has performed successfully. PHOTO: STRATA CORP.

CHALLENGING SERVICE: Environmental remediation is a difficult service to provide, but Strata has developed a method it believes is repeatable and necessary for the Bakken. PHOTO: STRATA CORP.

The BAKKEN MAGAZINE AUGUST 2013

roughly 15, and for short-term, the number is five, Griffin says. The majority of seasonal employees continue to come back as well. The hiring practices and staffing strategies help. Griffin and other division managers work to keep staff numbers high, in case an employee needs to take off. The company also maintains its fleet and reinvests in new or late-model equipment. â&#x20AC;&#x153;We want what will help employees do their job better and more comfortably,â&#x20AC;? he says. For Griffin and the rest of the executive team who are on the road 60 to 70 percent of their time, the company has added two airplanes

CONSTRUCTION AND INFRASTRUCTURE

PROVEN FLEET: When Strata began work in the Bakken, it used new, more expensive trucks instead of skimping on older vehicles that might hinder service, Griffin says. PHOTO: STRATA CORP.

to its fleet, making travel to western North Dakota and back much quicker. A shop in Grand Forks services the trucks Strata uses in the western part of the state. When dealing with external clients, the company has leveraged its ability to communicate with both large and small contractors from outside the area. According to Griffin, the team has developed project planning skills similar to those of consulting firms. As an example, he points to out-of-state project engineers who plan a site package for a well in January. “We know the scheduling issues and the seasons,” he says, so when project managers expect to pour concrete or work on a job site in harsh weather, Griffin and his team inform them what conditions will be like and what those conditions can do to project execution.

only 60 percent of its eastern N.D. staff works all year. And, every division is maxed out with work. “Sometimes they don’t work for three weeks, and sometimes we are running every truck we own and every truck we can rent.” Although a hazardous material team may not seem to mesh with the skill set of a concrete pouring company, Griffin says it is the nature, challenge and opportunity of the play. When companies and other clients told Grif-

fin that Strata couldn’t accomplish adding the service in the Bakken, he says the reply was simple. “We like for people to come in and tell us you can’t do that. That comes from our North Dakota heritage,” he says. And, as Magnus adds, having 103 years to figure out how to successfully operate and grow a business doesn’t hurt.

Catching Up With Demand Maintaining a happy and healthy employee base or client relationship may have helped Strata for the past 103 years, but since the Bakken started ramping up, Griffin and others have had to adapt. The company is now in the service business. Four years ago, a hazardous material handling and cleanup service was added to Strata’s list of offerings, along with well site maintenance, snow removal and pipeline servicing. “The company has always been bid-generated, where now we have more service-oriented businesses and people are going to hire you because of the job you do, not because your bid came in lower than the next guy,” Griffin explains. The strategy to emphasis employee satisfaction and industry research is working for Strata in the service industry as well. Griffin says over 90 percent of its western N.D. workforce is employed year around, while

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WELL OPTIMIZED: A gas flare burns at an oil field northwest of Williston, North Dakota. The Energy & Environmental Research Center is working to reduce flaring. PHOTO: WES PECK, EERC

The BAKKEN MAGAZINE AUGUST 2013

EXPLORATION AND PRODUCTION

Redefining

THE BAKKEN How Three Forks Formation and operational efficiency research will change the play By Luke Geiver

When John Harju and his research team are finished working on a $115 million project aimed at modeling the potential of the Three Forks Formation and Middle Bakken benches, the Williston Basin will never be the same. Consider the recoverable oil estimates provided

by Harju, associate director for research at the Energy & Environmental Research Center, estimates that could potentially result from the research effort. “The U.S. Geological Survey has published their new estimates (roughly 7 billion barrels of recoverable oil),” Harju says. “That is a number, as far as we are concerned is in the rearview mirror.”

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The conservative nature of the USGSâ&#x20AC;&#x2122;s estimates combined with emerging technology and constant discoveries in the Bakken have Harju confident that the real amount of recoverable oil in the Williston Basin ranges from 30 billion to 50 billion barrels. Anyone shocked by those numbers, or skeptical of Harjuâ&#x20AC;&#x2122;s estimates, could be assured that the oilfield is still growing, upon learning which exploration and production partners are involved in EERCâ&#x20AC;&#x2122;s assessment of the Bakken. Continental Resources Inc., the largest producer in the Bakken, headlines the list of those submitting time, effort and geologic data to EERC's research. As for the institution's success in the Bakken and its role in redefining the play, knowing what EERC knows is the best place to start.

The Basics The simplistic way that Harju and his team think of the Bakken can be likened to a kitchen and a dining room. Conventional resources, unlike the Bakken, are like dining rooms when compared to a kitchen, Harju explains. THE EXPERT: CuttingUnconventional resources are like the edge research on the kitchen, â&#x20AC;&#x153;that is where oil is made.â&#x20AC;? In Bakken is not new to John Harju, associate the era of old-technology, prior to todirector of research at day's long horizontal drilling and multiEERC. stage fracture methods, E&P companies PHOTO: EERC needed to find oil in the dining room. Conventional resources, or dining rooms, are places with both high rock porosity and high permeability that feature some sort of trap that has captured oil. â&#x20AC;&#x153;In essence, the oil has

CORE RESEARCH: Mechanical testing of rock samples provides strength parameters supporting the drilling and completion of Bakken wells. PHOTO: EERC

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'The denominator on this research is so huge that single type percent increases in recovery are extremely meaningful. A 1 percent increase of recoverable oil translates to roughly $150 billion of value.' John Harju, Energy & Environmental Research Center

THE GOAL: X-ray diffraction performed on Bakken rock samples provides researchers at the EERC with a better understanding of the geologic properties of the complex Bakken reservoir. PHOTO: EERC

moved into those reservoirs and got stuck,” Harju says. “That was the art of petroleum exploration pre-unconventional.” The Bakken, however, is like the kitchen where oil is made. With the advent of

hydraulic fracturing, exploration and production companies can now research rock formations such as the Williston Basin that feature impermeable, relatively low-porosity formations and engineer a reservoir where

there wasn’t one. “You are making reservoirs out of source rocks,” he adds, or as the kitchen to dining room analogy goes, E&P companies are turning the kitchen into the dining room.

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EXPLORATION AND PRODUCTION

ALL-OUT EFFORT: An EERC technician prepares to make permeability measurements on rock samples. The measurement is critical to developing advanced simulations, testing potential EOR scenarios. PHOTO: EERC

The Not-So Basics While Harju can explain the Bakken Formation, the Williston Basin and general geology in simple terms, his insight on the play is incredibly complex and should prove

WHEEL COMPACTOR

valuable for understanding the future of the resource. The EERC team has previously worked on water management and water recycling, which Harju explains will help them to de-

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velop a new water utilization method that has recently started to work in the Bakken. Previous research by Bethany Kurz, senior research manager, on the play’s water utilization opportunities have given the EERC team a strong base of knowledge for all water-related work. Harju says the team learned current technology isn’t particularly well-suited for flow back or saltwater created during the drilling and production process. Flow back’s tend to be slow in rate and high in salinity. A typical Bakken flow back will consist of roughly 20 percent salt. As a point of reference, Harju says, seawater is only 3.5 percent salt. If a completion team injects 4 million to 5 million gallons of water into a well, it might take a year or two to get that water back. “There is so much capital deployed for so little volumetric treatment opportunity that it poses an economic challenge,” he says. In addition to the slow return rate and high salinity, a rock formation in western

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ENHANCED OIL RECOVERY: Using data from two previously economically unsuccessful EOR trials in the Williston Basin, EERC believes it will find a way to make EOR successful. A field crew completes installation on a Bakken well.

North Dakota offers an exceptional saltwater disposal location. â&#x20AC;&#x153;It is an absolutely perfect disposal zone because it is isolated from the hydrocarbons and it is far below fresh water zones. Within the past year, however, the EERC team has begun researching the use of saltwater in salt tolerant gels, a practice currently being employed by a handful of production companies. In a typical fracture process, a completion team will use guar gum or another gelling agent to stop the proppant or sand and water mixture from getting stuck in the heel of the well, the portion between the vertical and horizontal casing sections. The guar gum creates a more viscous fluid and keeps the sand in suspension as it travels to the point of the fracture. The new gelling agents can take the place of guar gum, Harju says, and help to recycle flow back water for use in the fracture process. Although research into the new salt tolerant agents is new, Harju expects it to be an area of growth for his team and the Bakken. In addition to wastewater recycling, the EERC team is also working to establish the best possible approach to enhanced oil recovery (EOR). For the past year, the team has been analyzing and working to test the use of CO2 injected

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HIDDEN SOURCE: Using associated gas from the well head, EERC is researching and proving methods to use the gas to power a diesel generator. PHOTO: CHAD WOCKEN

The BAKKEN MAGAZINE AUGUST 2013

into an oil well as a vehicle to mobilize previously trapped oil droplets, allowing for the recovery of more oil. Currently, oil recovered in the resource is roughly 3 to 5 percent. “If we can change 3 to 5 percent to 4 to 6 percent,” he says, that is very meaningful. “The denominator on this research is so huge that single type percent increases in recovery are extremely meaningful. A 1 percent increase of recoverable oil translates to roughly $150 billion of value.” To find that value, EERC has started to analyze two unsuccessful Bakken EOR pilot projects: one in the Elm Coulee field of Montana and the other in Mountrail County of North Dakota. The team has arranged a data-sharing agreement that will help them better understand the efforts. According to Harju, the EERC team has developed some exciting tests that could help prove Bakken EOR by 2014. Previous attempts to recover additional oil used the huff and puff method of injection, with very large volumes of CO2 injected into single wells with the hope of mobilizing oil in the vicinity of those wells. The attempts revealed that CO2 in the Bakken is very mobile, and according to Harju, it was difficult to retrieve the CO2 and any incremental oil. Unsuccessful attempts to prove EOR with CO2 aren’t deterring Harju and the team, however. Because the rock formations in the Williston Basin are typically oil wet with a thin film of oil covering each tiny granule, the use of water flooding, a process that pushes water through a fractured reservoir to mobilize additional droplets of oil,

EXPLORATION AND PRODUCTION

isn’t an option. Using water, he adds, would only push the oil deeper into the formation. But, CO2 when dissolved into oil swells, a process that if done correctly, can essentially pop off the unrecovered oil droplets from the tiny granules. “We are very bullish on this.” The only thing that really competes with EOR in the Bakken is the adoption of refracking practices. To date, Harju says he is only aware of approximately 100 wells have been refracked. Of those, roughly 10 percent have had little success while another 10 percent have shown tremendous success. In the Barnett Shale of Texas, A similar formation (although primarily a gas field) to that that of the Bakken, refracking is highly prevalent, and secondary fracturing operations can yield nearly identical results to initial production. “I think we are very much in the infancy [of refracking] and design and how to choose the right refrack candidates,” he explains. “We still have hundreds of wells that haven’t even been fracked once.”

state will be used to provide a reservoir characterization model. To do that, the team will use microseismic, geophysical and bore hole logging data. Using geophones, the team will listen to fractures as they are being stimulated to produce new data. The research will last roughly three years and will rely heavily on data logs from CRI, Marathon Oil and Whiting Petroleum Corp. The data compilation project is the first of its kind for the Three Forks Formation,

and will also likely include partners from outside the production industry. “You end up feeling like a very insignificant part of these very large teams,” Harju says. “This is decades and decades of oil and economic vitality to the state. I feel very privileged to be involved with it.” Author: Luke Geiver Managing Editor, The Bakken magazine lgeiver@bbiinternational.com 701-738-4944

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The New Era Work on saltwater tolerant gels or EOR methodology may have given the EERC team, and the entire Bakken industry, a better understanding of the play, but work on the Three Forks Formation will usher in a new era. Based on initial estimates and data projections on the Three Forks Formation’s potential, a single well pad could house 20 wells: four laterals into the Middle Bakken and four laterals into each discrete bench of the Three Forks. “This is a big new project that is hugely exciting,” he says. “It is focused on helping to better define the resource.” The project will also research ways to optimize production methods and provide ways to yield better economics while reducing the environmental footprint of all operations. The play is no longer about finding and securing oil through leases, he says, but rather about finding an orderly way to develop the resource. For the Three Forks Formation work, the end goal is a three-dimensional model that will be available to the partners in the project and the state. Roughly 65 percent of the funding awarded to the EERC from the

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IN PLAY

Launching into the Shale Business By The Bakken Magazine Staff

Bart Sweazea is a jack-of-all-oil-trades and he’s bringing his multipronged skill set to the Bakken. In his early 20s, Sweazea began working in Texas as an oil and gas broker. “I would spend all of my time in the geologist’s office,” he says, “then I started to go chase my own leases.” After spending a few years putting small deals and drilling programs together, Sweazea endured a head-on automobile collision that changed his career path away from oil lease deal making and drilling programs to drilling mud solids control. “After I recovered, I had a friend who offered me a job in the field helping run a solids control company and I wanted to learn all I could about drilling horizontal shale wells, so I took it.” Solids control allows a drilling operator to drill a well faster while avoiding stoppage time for drill cuttings and mud weight removal. “Once you get to a certain depth you can’t go fast and you are just putting your cuttings back in the hole,” Sweazea says. “You have to get those cuttings out in order to drill fast.” The solids control business was the right choice for

Sweazea. In total, he worked on, or participated in, 425 wells in the Barnett Shale of Texas. “We got them down to a science. I was working on some of the best rigs, drilling wells in 14 to 16 days,” he says. After 8 years of success, Sweazea decided to start his own independent oil and gas company to participate in the shale oil production industry, specifically the Bakken shale. His experience in the field provided knowledge of the shale drilling process, and the launch of Pangean Energy. Former connections and investors with an early lease presence in the Bakken helped the company land its first acreage in the Williston Basin and by this fall, the company expects to have drilled it's first well. Sweazea has put together a team of geologists, engineers and drilling specialists from his connections in North Dakota and Texas. He hopes to utilize some of the solids control equipment and strategies he previously used in Texas to drill wells faster. “I’m hoping I can turn some of the drilling contractors up there on to some equipment that will improve drilling times,” he says. “We are going to go out there and see if we can hit some of the biggest wells.” All laterals are expected to

425 AND COUNTING: After getting his start in the waste solids control business, Sweazea was a part of 425 horizontally-drilled shale wells. PHOTO: PANGEAN ENERGY

The BAKKEN MAGAZINE AUGUST 2013

IN PLAY

MOVING UP: Bart Sweazea has lined up lease acres and found the necessary funding to drill multiple Bakken wells. He is headed to North Dakota from Texas in late summer. GOOD TIMES: According to Sweazea, those with the skill set necessary to drill horizontal wells in any shale formation are working PHOTO: PANGEAN ENERGY in a great industry, based on the success rate of most shale wells. PHOTO: PANGEAN ENERGY

be at least two miles, and according to Sweazea, the drilling team is planning to emphasize high-volume fracking in each well. And, Sweazea plans to drill more than just a few wells. Pangean Energy has already formed a joint venture with another Texas-based explora-

tion, production and enhanced oil recovery firm that Sweazea says will help solidify the role of Pangean Energy in the Bakken. “We decided that we were going to launch the company into shale plays because, in my experience, I know they have an

exceptionally good chance of making a productive well,” he says. Of all Barnett shale wells he was a part of, Sweazea says he didn’t miss on one. “It taught me that the best place to drill an oil well is in the middle of an oil field,” he says with a laugh.

“I can’t think of a happier time since I’ve been in the oil business. The success rate in the Bakken is phenomenal. It is a good time to be in the oil business if you know how to drill a shale well.”

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MAKING IT

THE FIRST AND LAST MILE: Savage has worked to make crude by rail shipment more efficient in the first and last miles of the process by providing clients with key performance indicators that prove how well the Savage process is working at any given time. PHOTO: SAVAGE

Improving the Pipe Supply Chain By The Bakken Magazine Staff

When Savage’s rail pipe transloading facility opens in Trenton, N.D., it will be the first of its kind in the Bakken. The supply chain solutions company acquired Fort Worth Pipe―a Texas-based pipe supplier and service provider started by a brother-based team nearly 30 years ago―earlier this year because the piping outfit fit into Savage’s bundlefocused business model. The new Savage facility will now 36

provide pipe storage, inventory supply and a myriad of other services. “We know that when you bundle a number of capabilities together it makes you distinctive from your competition,” says Erik Skoy, vice president of oil and gas business for the company. “Our customers can get more value from Savage because they can call one person, or have products moved by multiple means.” The company isn’t new to North Dakota. Savage has been

The BAKKEN MAGAZINE AUGUST 2013

WELL-TRAINED: The Trenton, N.D., facility will offer a certified pipe-threader at the the pipe transloading facility to create a one-stop shop for all tubular casing needs. PHOTO: SAVAGE

moving coal from the state the past 15 years, and has been investing and growing its presence in the Williston Basin’s oil play the past four years. “We have put in a lot of the company’s resources, time and people

to grow the business because we think we have a lot of capabilities that we can share with exploration and production companies,” Skoy says. Those capabilities are highlighted by the effort Savage has

MAKING IT

IT STARTS WITH TRUCKS: Savage got its start through its trucking fleet, but for the first time in the Bakken, it will deploy all of its capabilities. PHOTO: SAVAGE

invested in developing a sophisticated logistics system to move bulk material in and out of the wellhead during drilling and completion projects. Using the system developed in part by Fort Worth Pipe, Savage will provide pipe transloading off the train, storage, inventory management, pipe trucking to the wellhead and pipe unloading and set-up so that as Skoy says, “folks at the well site don’t have to worry about anything other than putting the pipe down the

hole with their casing crew.” The Trenton facility will also offer a Web-based portal allowing all clients to view inventory supplies, track shipment locations and monitor invoices for products received or pending. The Savage team will also include a team that will travel to the well site and remove pipe thread protectors, clean pipe threads or perform inspections to ensure no defects are present. The clean and drift process, will allow all pipes to receive the

mandril pipe checking process, which Skoy says resembles pulling a dinner plate the size of the inside diameter of the pipe through the pipe to ensure imperfections aren’t present. A certified American Petroleum Institute pipe threader will also work at the facility to perform other services and reduce the need for additional trips by clients to pipe-threading locations. Running and maintaining the one-stop-shop pipe supply and services facility won’t come without challenges, Skoy says.

Inventory management is a major challenge, along with moving supply safely while documenting all services performed. The facility will potentially look to add additional staff and the company has already secured adjacent acreage for future growth (and pipe storage). The location is already on a rail line. “At a high level,” Skoy says, “we are excited to be using our full capabilities to help lean out the supply chains of exploration and production companies to minimize the drilling and completion costs at the wellhead.”

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READY TO WORK: Coleman Baird has been appointed general manager of the Acme Tools Williston, N.D., location set to open in late summer. He applied for the position at a job fair and previously worked in Williston. PHOTO: ACME TOOLS

Staffing Insight By The Bakken Magazine Staff

“When you are talking about highly technical folks, it is a small pool that we are working with,” he says. Conine says the current state of the industry’s supply of multiyear, highly educated individuals makes his job tough. In the early '90s when commodity prices fell, industry jobs were in low demand, specifically petroleum engineers. Classroom sizes dropped, in some cases, from 200 students to five. And, he adds, “When you look at the industry today, there are a lot of guys that are getting close to retirement age.” To ensure his database of potential candidates remains strong, Conine has become an exceptional note taker. After a networking session, Conine will organize everything he learned into a database so he can track potential candidate work experience and interests. “A lot of times we are building a relationship for months or even years before something lines up perfectly for a candidate to move to a company,” he says. Many of his successful job placements have been for office-based positions in Denver or Houston. His company client list includes Continental Resources Inc., Murex Petroleum Corp. and others.

Clayton Conine is a candidate stockpiler. Toni Poston is a job fair veteran. In-house Staffing Teams Toni Poston, human resource recruiter Both are responsible for providing Bakken firms with talented workers for Acme Tools, says her biggest challenge in and have their own unique staffing staffing new or existing Williston Basin-based challenges that help reveal the state of stores is housing. “We can’t just assume that they have a place to live,” she says of potential hiring in the Bakken. Third-Party Staffing Conine, senior search consultant for Texas-based Energy Search Associates, specializes in matching or finding upstream job candidates with oil and gas companies. In 2006, Conine and his team began working for companies operating in the Bakken. Although Conine’s team frequents industry and geological society events to find potential job placement candidates, the time required to place a petroleum engineer or project manager could be several weeks to several years, he says, and is one of the most challenging aspects of his job.

The BAKKEN MAGAZINE AUGUST 2013

hires. “One of the first questions we ask applicants is if they have housing. If they don’t, there is a good chance they will leave for an employer who offers them a place to live or money to afford a place to live on their own.” Along with workforce housing, Poston also deals constantly with oilfield wages. “We want to remain competitive, but we can’t compete with the oilfield wages,” she says. Fortunately, Poston has found success at regional job fairs. “We have had tremendous success. Many people have shown up, tired of the schedule and hours they’ve been working in the oilfield.” During the events, Poston prioritizes explaining the work hours at Acme Tools, which don’t include evenings or Sun-

HIRED

days, an aspect she is finding goes a long way for people searching for a more typical lifestyle. Maintaining company culture is a priority for Poston and her ENERGY INSIDER: Clayton Conine, senior team, so many new search consultant, hires are placed in existkeeps an expansive ing stores outside of the database of potential Bakken hires. Williston Basin region PHOTO: ENERGY SEARCH to learn the standard ASSOCIATES operating procedures and general business approaches championed by the company. And, although new hires do need to have an understanding of the oil and gas industry, Poston doesn’t make it a priority. “Our primary business is more focused on supplying the contractors building the infrastructure in the area,” she says. Both Conine and Poston note the role weather plays in hiring. “Weather always adds

THE REAL FOCUS: Staffing a new employee doesn’t mean finding a Bakken expert, according to Toni Poston, human resource recruiter for Acme Tools. Knowing the direct industries served helps, however. For Acme Tools, it isn’t the oil and gas industry, it is the infrastructure builders. PHOTO: ACME TOOLS

another wrinkle,” Conine says. Finding candidates within or familiar to the region is also a priority for both. For future staffing needs, Poston will continue looking to job fair events and referrals, and according to Conine, there will always be a job for his job-finding service because most don’t have the same database or personnel tracking skill set that Conine and his team can offer. However difficult staffing and employee retention in the Bakken might be, it isn’t stopping companies from adding new divisions. Rick Siebels, general manager for North

Dakota-based linens, garments and bathroom supplies provider AmeriPride Services, says his main challenge in maintaining staff and a consistent level of service to the region is all about the ever-changing business climate. Siebels cites the turnover of employees at current Bakken-based accounts as the main difficulty. But, even with a revolving business climate, AmeriPride has added routes and additional facilities. The company has also added a direct sales position specifically hired to meet Bakken demands.

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FINANCE

CONTRIBUTION

You complete work and create an invoice

You recieve the remaining invoice value, minus factoring fees

Invoice is sent to factor -- factor verifies and purchases

Factor contacts your debtor, collects payment on your behalf

Factor funds up to 90 percent of the invoice value immediately

Operational Financing Helps Bakken Businesses Explore Opportunities Understanding the invoice factoring process By Andy Balgord

The rise in oilfield activity in the Bakken has opened doors for businesses offering a wide range of services. Businesses from across the country have flocked to the Bakken, interested in exploring the emerging opportunities and expanding their foothold within the industry. While opportunities for growth are present within the Bakken, exploring them is not always an easy task. Sustained growth

requires capital, and a great deal of it. Unfortunately, cash flow is a major issue for many business ownersâ&#x20AC;&#x201D;the long pay delays that are common within the industry can leave owners waiting up to 90 days for payment for services rendered or product delivered. When more money flows out of the company than comes in, cash reserves can quickly become depleted, leaving business owners without the capital necessary to explore opportunities. Business owners with

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of The Bakken magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

The BAKKEN MAGAZINE AUGUST 2013

negative cash flow may not have the capital needed to cover the upfront costs of materials, labor, equipment and fuel required to bid for or complete a project. While the costs of doing business in the oilfield industry are relatively clear, sources for operating capital are not. In the current economy, commercial lenders are hesitant to extend financing to business owners. For business owners who are unable to obtain a traditional bank line of credit, the prospects for expansion and continued success may seem bleak. There are alternate options for obtaining the necessary capital, however, including the invoice factoring process.

Understanding Invoice Factoring Also known as accounts receivable financing, invoice factoring is a financial transaction in which a business sells a completed work invoice for instant cash. Rather than waiting 30 to 90 days for payment from a customer, oilfield businesses can factor their invoices and obtain the operating capital they need to take on more business. Invoice factoring companies offer quick cash payments for work completed by oilfield businesses. If a water hauling company, for example, completes a job for a customer and invoices its client for the work, a factoring company will purchase that invoice and pay part of the amount to the water hauler the very same day. The factoring company will keep the remaining invoice balance, known as a reserve, in an escrow account until the invoice has been paid by the original debtor. Once payment has been received, the reserve, minus any fees, is released. Unlike traditional bank lines of credit, factoring arrangements are not based solely on the creditworthiness of their customers. While credit is considered in some cases, factoring companies consider the value of their customersâ&#x20AC;&#x2122; accounts receivables and other details when underwriting a financing agreement.

FINANCE

Each factoring company has different qualification criteria for invoices that it will purchase, and varying processes through which it offers operating capital. Advances can be made through wire transfers, electronic funds transfer using an automated clearing house, deposits to fuel accounts and via check. The costs of the factoring process vary from company to company, and are often based on the volume of invoices factored on a monthly or yearly basis. Factoring companies will also charge interest on the advance, with the amount charged based on the time it takes to collect payment from the original debtor.

Meeting Business Needs Without incurring debt or tying themselves to a high interest loan, business owners may obtain operating capital quickly and affordably through the factoring process. Whether a business owner has fallen behind on the financial obligations of the company, or has experienced substantial growth and needs funds to take on new projects, factoring fills a need that many business owners may one day encounter. Kraig Gunwall, sales manager at Burns-

ville, Minn.-headquartered oilfield financing company TCI Business Capital, offered additional insight into the benefits of the factoring process. “Invoice factoring is a viable option for business owners who have completed a job, but cannot afford to wait for payment for that work,” he said. “In many cases, factoring can provide the operating capital a business owner needs to address a cash flow issue, and to meet the financial obligations of the business. Even when banks

have already said no to a business owner, factoring may still be a viable option.” Certainly, as companies within the Bakken continue to explore additional opportunities and banks continue to maintain strict lending qualifications, factoring process will remain a viable option to obtain the operating capital necessary to achieve success. Author: Andy Balgord TCI Business Capital 952-656-3564 ABalgord@tcibizcap.com

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