The Bakken Magazine September/October 2016

SEPTEMBER/OCTOBER 2016

Version 2.0 BEGINS Strategy and Operational Enhancements, World Dynamics Create Bakken’s New Era

Plus www.THEBAKKEN.com Printed in USA

Waste-Heat Tech for Flaring Page 20

Page 14

And

Pipeline Stats Page 6

/2&. ,1 <285

(;+,%,7 63$&( 63216256+,3 /LPLWHG 1XPEHU RI 6SRQVRUVKLSV $YDLODEOH 'RQ W :DLW %HFRPH D 6SRQVRU 7RGD\ 6XUURXQG <RXUVHOI ZLWK %DNNHQ 'HFLVLRQ 0DNHUV 'RQ·W :DLW *HW <RXU 3UHPLXP %RRWK 1RZ %\ SXUFKDVLQJ D ERRWK \RX DUH VXUURXQGLQJ \RXUVHOI ZLWK LQGXVWU\ SURIHVVLRQDOV ZKR DUH ORRNLQJ IRU VROXWLRQV WR WKHLU FKDOOHQJHV

5' $118$/

$ 35(0,(5 1257+ '$.27$ 6+$/( 2,/ (9(17 )RFXVHG RQ %DNNHQ 3OD\ 7HFKQRORJLHV DQG (IILFLHQFLHV 7KH %DNNHQ &RQIHUHQFH ([SR LV WKH QDWLRQ·V SUHPLHU HYHQW IHDWXULQJ LQQRYDWLRQV WKDW DUH GULYLQJ QHZ HIILFLHQFLHV DQG WKH SURILWDELOLW\ RI RLO UHFRYHUHG IURP VKDOH IRUPDWLRQV

&21)(5(1&( (;32

-XO\

%LVPDUFN (YHQW &HQWHU _ %LVPDUFN 1'

ZZZ 7KH%DNNHQ&RQIHUHQFH FRP %$..(12,/&21) )ROORZ 8V WZLWWHU FRP WKHEDNNHQPDJ

_ VHUYLFH#EELLQWHUQDWLRQDO FRP _

CONTENTS

SEPTEMBER/OCTOBER 2016

VOLUME 4 ISSUE 5

Pg 20

PRODUCTS & TECHNOLOGY

The Bakken

Bringing Thermoeclectric Tech To A decorated tech developer will demonstrate flare-utilization equipment in the Bakken that is based on innovative—and proven—waste heat recovery.

BY PATRICK C. MILLER

DEPARTMENT

Pg 24

IN PLAY

Bakken Executive Q&A: Hess Corp.

Pg 14

Hess Corp.’s Bakken asset manager explains what has changed, what needs to change and what is coming in the Bakken.

EXPLORATION & PRODUCTION

BY THE BAKKEN MAGAZINE STAFF

Setting the 2017 Bakken Stage

4 Editor’s Note

The New, Different and Enhanced Bakken

BY LUKE GEIVER

Low oil prices and a wide array of company actions or messaging defined the summer of 2016. Still, sentiment from the Bakken’s operators, service providers and outside investors helps to highlight possible 2017 activity.

6 ND Petroleum Council: The Message

Bakken 2.0: The New Normal in 2017 and Beyond

BY RON NESS

BY LUKE GEIVER

5 Events Calendar

ADVERTISER INDEX 28 AE2S

22 Matrix Service

12 Bartlett & West

11 Newson Gale, Inc.

19 Bluebeam Software, Inc.

16 Protego USA, Inc.

ON THE COVER: The sun shines through a well head in North Dakota.

18 Golight Inc.

10 Seaco Global Ltd

PHOTO: THE BAKKEN MAGAZINE

23 KLJ

5 Hotsy Water Blast Manufacturing LP

2 The Bakken Conference & Expo 27 Trident NGL Services

THEBAKKEN.COM

3

EDITOR'S NOTE www.THEBAKKEN.com

The New, Different and Enhanced Bakken There has always been a fascination with the Bakken. For media,

the play has always offered an interesting angle for a buzzworthy story that has nationwide appeal. Oil and gas professionals often say the Williston Basin has been and will always be a proving ground for the newest technologies and strategies suitable for Luke Geiver unconventional oil and gas development. InvesEditor tors—from mineral asset teams to entrepreneurs to The Bakken magazine Wall Street fund managers—have found enormous lgeiver@bbiinternational.com success betting big on the Bakken. With depressed oil prices and the resulting drilling and completion activity decreases during the past 12-plus months and counting, some might argue the luster or positive aura surrounding the Bakken has faded.

How often do those of us involved with the play get asked, or even told, by folks outside the Bakken’s day-to-day operation, about the Bakken’s demise? Our team’s experience is: very frequently, and what we’re told suggests that things aren’t good and that production in the play has basically stopped. But, those involved in the Bakken are probably laughing right now, knowing how far off base that assessment actually is.

This month’s content offers a great glimpse into the real state of the Bakken. Sentiment from many of the stories is linked to a sense of optimism and a willingness to expand, enter or continue at a time when many might think the only thing to do is stay idle.

From updates on new investment groups formed just to target the Bakken, to technology developers telling us there has never been a better time to bring new tech to the Williston Basin, it is apparent that the Bakken has not only survived the low oil price environment, but that many of the main players are planning for revamped activity levels. While oil price analysts continue to flip-and-flop on future projections through 2017, there is a new story brewing in the Bakken that you can see taking place through the stories from this issue. It has to do with change, adaptation and new strategy implementation. It is clear that partaking in those actions is worth it to the vast majority of the Bakken community. Bakken 2.0, as the North Dakota Petroleum Council is calling it, is just beginning and this new version appears to be both different and enhanced.

VOLUME 4 ISSUE 5 EDITORIAL 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:

www.TheBakken.com TM

4

COPYRIGHT © 2016

by BBI International

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

Please recycle this magazine and remove inserts or samples before recycling

Follow us: twitter.com/thebakkenmag facebook.com/TheBakkenMag

EVENTS CALENDAR

The Bakken magazine

will be distributed at the following events: North Dakota Petroleum Council Annual Meeting September 19-21, 2016 Minot, North Dakota Issue: September/October 2016 The Bakken magazine

OilComm

October 11, 2016 Houston, Texas Issue: September/October 2016 The Bakken magazine

NAPE Denver

October 12-13, 2016 Denver, Colorado Issue: September/October 2016 The Bakken magazine

Energy Generation Conference

January 24-27, 2017 Bismarck, North Dakota Issue: January/February 2017 The Bakken magazine

NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

THE CURRENT LANDSCAPE: Low oil prices have changed the way operators and service providers think about their development plans. Those changes are a large reason why the Bakken is entering a new phase of development.

PHOTO: THE BAKKEN MAGAZINE

Bakken 2.0 : The New Normal in 2017 and Beyond

By Ron Ness

Oil prices seemed to have bottomed out, and the industry appears to be slowly coming out of dormancy.

Although market conditions are still short of ideal, the slight uptick of activity is a sign of relief for many in North Dakota.

6

Many have pointed to the recent down cycle as a traditional “bust,” but for those paying closer attention, what we’ve seen over the past two years is more of a reboot. Industry used the downtime to take a closer look at operations, trim the fat,

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

and find better, more innovative ways to do more using less.

Technology and efficiencies have emerged to better define the industry, and usher in a new era of oil and gas development, one that will be less prone to boom and bust cycles and more

of a steady mainstay in our state’s economy.

This next era will be among the topics of this year’s North Dakota Petroleum Council Annual Meeting to be held in Minot on Sept. 19-21. Industry experts will be on hand to talk

NORTH DAKOTA PETROLEUM COUNCIL

about the latest innovations, including Bakken refracks, and Continental Resources President and COO Jack Stark will give a keynote address outlining his thoughts and visions of the future of the Bakken.

But the future of the industry rests on more than its ability to evolve and innovate while facing market headwinds.

Today, the greatest threat the industry faces is regulatory overreach from the federal government. The rules, which have come out of the EPA and BLM, are duplicative and not only usurp the state’s regulatory authority, but would also have the opposite intended effect, rolling back the progress industry has made at addressing challenges such as flaring. Furthermore, these rules come at a time when industry is working to preserve jobs and move toward recovery. According to a docket filed with the EPA, simply gathering the information required under EPA’s proposed rules would cost the industry $40 million.

The rules would also come at a significant cost to the state and impact its ability to administer its oil and gas regulatory program, no doubt causing additional unintended challenges for our state.

With it being an election year, the future of our energy industries and the country they fuel remains uncertain. Americans will have the opportunity to embrace our country’s new role as an energy superpower or revert back to the decades where we were reliant on energy from nations that fund terrorism and would rather do us harm. We will have the choice

to continue to fuel a manufacturing renaissance powered by affordable and abundant energy that brought jobs and opportunity back to the U.S., or we can see those jobs return overseas.

We can choose to continue our path forward in fueling our allies and helping ease geopolitical conflicts, or we can return back to our years as hostages of authoritative regimes. This and more is at stake.

Annual meeting attendees will have the opportunity to hear from Andrew Browning, executive vice president of Consumer Energy Alliance, on the Campaign for America’s Energy and how the industry and its employees can—and must—motivate its bases to ensure we elect candidates who will stand for a fair regulatory environment. We will also have the opportunity to hear from North Dakota’s gubernatorial candidates on their visions for the future of our great state.

As summer wanes, a new year approaches and we have an opportunity to help write the future for our industry and the state. We look forward to beginning that dialogue at our 2016 Annual Meeting and hope to see many of you there, ready to launch the next era of development and prosperity in North Dakota.

Author: Ron Ness President, North Dakota Petroleum Council tsandstrom@ndoil.org 701-557-7744

THE REAL HURDLE: The biggest obstacle for continued development of the Bakken is not technology or innovation, but instead new regulations that overlap existing policies, according to Ness.

PHOTO: THE BAKKEN MAGAZINE

THEBAKKEN.COM

7

BAKKEN NEWS

BAKKEN NEWS & TRENDS

Modern Day Pipeline Picture: Safety A new report completed by the Association of Oil Pipe Lines and the American Petroleum Institute shows the high priority placed on pipeline safety, the report’s creators said. “But as an industry, we can always do more,” according to David Murk, pipeline manager for API. “By constantly evaluating our safety programs and activities, learning from past experiences and making timely and adequate adjustments, our industry will continue working towards its goal of zero incidents,” he said.

The 44-page report includes information on pipeline safety principles; safety records including where performance is improving and where challenges remain, and new operation technologies or approaches being implemented for inspecting, monitoring and managing pipeline safety programs.

Pipeline Incidents by Size 35,000 30,000 25,000

44%

20,000

65%

<= 1 bbl

15,000

17% 5%

<= 5 bbl

>= 50 bbl >= 500 bbl

10,000 5,000 0

1

25

49

73

97

121

145

169

193

217

241

Each Liquids Pipeline Incident in 2015 by Barrel Size

8

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

265

289

313

337

361

385

409

433

454

BAKKEN NEWS

By The Numbers - 207,800 miles of liquids pipeline cross America from production areas to refineries to consumers and manufacturers—a 13 percent increase from 2011 to 2015.

- 72,400 miles of pipeline transport crude oil from production areas to refineries—a 29 percent increase over the past five years.

Incidents Related to Operations, Maintenance & Integrity Management Crude Barrels Released in an HCA

Total Number of Incidents

- 99.9 percent of crude oil and petroleum products delivered by pipeline reach their destination safely.

2015

- 6.9 billion barrels of petroleum products delivered by pipeline in 2014—an 8 percent increase since 2010.

- $2.2 billion—the amount spent by liquids pipeline operators in 2014 for evaluating, inspecting and performing maintenance on their pipeline systems.

2014

- 67,500 miles of pipeline transport natural gas liquids to farmers and industrial manufacturers—a 15 percent increase over the last five years.

2013

- 16.2 million barrels of crude oil and petroleum products delivered by pipeline in 2014—a 20 percent increase since 2010.

- 62,600 miles of pipeline deliver gasoline, diesel and jet fuel to drivers, workers and travelers—a 3 percent increase over the past five years.

2012

- In 2015, 65 percent of pipeline incident releases were less than 5 barrels.

2011 Operations & Maintenance (e.g. equipment failure)

Integrity Management (e.g. corrosion & cracking)

Outside Force Damage

Other

SOURCE: AMERICAN PETROLEUM INSTITUTE

THEBAKKEN.COM

9

BAKKEN NEWS

SAB, API differ on fracking impact on drinking water While the U.S. Environmental Protection Agency completes its assessment of the potential impact of hydraulic fracturing on drinking water, industry experts, researchers and advisors continue offering suggestions to help EPA complete its report.

In a previous draft of the report, the EPA concluded that fracking has no widespread impact on drinking water sources.

The American Petroleum Institute believes the EPA’s findings are not only clear, but that they are also complete. “Study after study shows that hydraulic fracturing is safe,” said Erik Milito, API upstream and industry

10

operations director.

The EPA’s Scientific Advisory Board doesn’t believe the EPA’s work on fracking and drinking water is complete, however. The SAB has completed a peer review of the EPA’s study, stating in the executive summary of its peer review that “in general, the SAB finds the EPA’s overall approach to assess the potential impacts of hydraulic fracturing water cycle processes involved in oil and gas production on drinking water resources to be comprehensive but lacking in several critical areas.”

During the past two years, the SAB has held five public

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

teleconferences and four public meetings to help it create recommendations to EPA on the subject of drinking water and fracking. The EPA will now utilize the input from SAB, along with public input and comments to revise its final assessment on fracking and drinking water.

The North Dakota Industrial Commission has already issued its comments to the EPA. In a letter sent to the EPA, NDIC said that, “EPA’s draft assessment is the most complete compilation of scientific data to date and will give state regulators, tribes and local communities and industry

around the country a critical resource to identify how best to protect public health and their drinking water resources.”

The NDIC also expressed hopes that SAB would add quantitative information on how many instances of each mechanism/vulnerability were identified, the geological and geographical circumstances of each instance and recognition of effective regulatory processes that have been created by states like North Dakota to address those mechanisms/ vulnerabilities.

With more than 950 sources of information, published papers, technical reports and

BAKKEN NEWS

peer-reviewed scientific EPA reports, the API disagrees with SAB’s opinion that more work needs to be done to allow the EPA to say there is no widespread or systematic impact of drinking water due to hydraulic fracturing.

“Instead of denying the scientific evidence proving the environmental benefits of hydraulic fracturing, the U.S. should be celebrating the overwhelming data demonstrating that hydraulic fracturing is helping reduce GHG emissions and other emissions, and has helped lower energy costs for consumers,” Milito said.

SCIENTIFIC ADVISORY BOARD’S RECOMMENDATIONS FOR REVAMPED REPORT: · Provide clarity and support of major findings. · Recognize local impacts. · Provide more case studies. · Explain probability and risk of failure scenarios. · Explain chemical toxicity and hazard levels. · Provide characteristics of hydraulic fracturing fluids. · Examine baseline water quality data. · Define the term proximity. · Define the treatment of hydraulic fracturing wastewater. · Provide better accessibility of the assessment to a broad audience.

THEBAKKEN.COM

11

BAKKEN NEWS

Eagle Ford tests role of operations in well site contamination events

SITE VISITS: The researchers made sampling excursions in the Eagle Ford shale region in June and November of 2015. They used a mobile mass spectrometry system, in collaboration with Guido Verbeck of the University of North Texas, that allowed the team to identify individual points of contamination.

PHOTO: UNIVERSITY OF TEXAS-ARLINGTON

12

Researchers have turned the Eagle Ford into their lab to test the probability of contamination events in and around well site areas developed through unconventional oil and gas processes. Chemists at the University of Texas at Arlington found that highly variable contamination events registered in and around unconventional oil and gas developments are the result of operational inefficiencies and not inherent to the extraction process itself.

According to the researchers, “variable contamination events, attributable in many cases to specific natural gas flaring units, condensation tanks, compressor units and hydrogen sulfide scavengers, indicate that mechanical inefficiencies, and not the inherent nature of the extraction process as

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

a whole, result in the release [these] compounds into the environment.”

Kevin Schug, a UTA professor of analytical chemistry, said the results found by his team “suggest that air contamination events from fracking can be monitored, controlled and reduced.”

The researchers also noted that ambient compound emissions in and around the fracking sites were within the federally mandated acceptable limits for short-term exposure.

Schug also leads the Collaborative Laboratories for Environmental Analysis and Remediation lab. CLEAR is dedicated to the development of remediation technologies and best management practices to effectively handle and decrease the occurrence of contamination events.

BAKKEN NEWS

New requirements mean new look coming to Bakken well sites Starting in October, well sites in North Dakota may look different. Under a requirement adopted by the North Dakota Industrial Commission, well and facility sites will now feature a six-inch berm around new and existing facilities.

Through the new requirement, operators will now have to have berms around an entire site and dikes around tanks.

The goal of the new requirement is to help better prevent spills from leaving a site. According to state data collected by the North Dakota

Oil and Gas Division, there has been a decline in the percentage of spills contained to well pads since 2013.

The new requirement will affect roughly 4,000 sites, according to the North Dakota Department of Mineral Resources. The cost to construct most new berms will be roughly $3,500. The rules will also require oil tanks and equipment to be resistant to produced fluids.

SITE CERTAINTY: If well sites or tank batteries do not yet have a berm surrounding the site, new North Dakota regulations will require that berms are added.

PHOTO: THE BAKKEN MAGAZINE

The Bakken magazine is

S ll Here and Strong

Others may have stopped covering the Bakken, however The Bakken magazine con nues to be the premier trade publica on bringing you original weekly news stories about the Bakken Shale Play.

Get Your FREE Subscrip on at www.TheBakken.com THEBAKKEN.COM

13

EXPLORATION & PRODUCTION

Setting the

2017

BAKKEN STAGE After a summer of inconsistent oil prices, actions and trends amongst operators, investors and service providers, the framework for 2017 activity levels has been set

By Luke Geiver

The summer of 2016 has revealed many things about the players connected to the Bakken. In contrast to previous

summers, during the past three months there were few overarching themes, messages, strategies or common actions shared by the majority of the main Bakken operators, service providers, midstream entities or industry experts. With oil prices slumpingâ&#x20AC;&#x201D;then showing slight signs of recovering before slumping againâ&#x20AC;&#x201D;there was no one-size-fits-all approach to fulfilling contracts, paying shareholders, completing wells, maintaining operations or employees, or predicting the best course of action heading into the future. The strategies described to shareholders varied from one operator to the next. Some service providers said they would focus on a small number of clients while others made a point to continue their

CLARITY IS COMING: After a summer of low oil prices, Bakken entities are now offering strategies for next year after working to survive the difficult environment of 2016.

PHOTO: THE BAKKEN MAGAZINE

14

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

EXPLORATION & PRODUCTION

THEBAKKEN.COM

15

EXPLORATION & PRODUCTION

‘Producers, particularly in the current environment, are focused on reducing capex and lease operating costs without impacting production flow assurance.’

- Joel Fry, Principal, Tailwater Capital LLC

lower price maneuvers to reach and work with a wider group of clientele. Many entities looked to sell, while others focused on acquiring. Despite the variance in activity and strategy, a handful of themes or memorable moments created by some of the Bakken’s biggest, as well as lesser-known entities offered insight into the Bakken and how the play could be described by year’s end.

Servicers Make Bold Statements

When exploration and production firms began touting their well cost reductions at the onset of the low oil price environment, many investor analysts began questioning the long-term viability of the price reductions. In most cases, a portion of the root of the price reductions were linked to the service providers and their willingness to take less for their services.

In July when oil prices were rising, analysts brought up the question with both operators and service providers: Will service cost reductions continue when oil prices and activity levels recover?

For the world’s largest service provider, the answer was an emphatic, “No.” The market, said Paal Kibsgaard, CEO of Schlumberger, was underestimating the role of the supplier industry to continue accepting fee reductions. According to Kibsgaard, during the past seven quarters, fees have been tied to a time schedule or some kind of oil price trigger. When prices recover, he said at the time, service companies will not continue to offer the same level of flexibility, but will instead look to recover contract pricing conces16

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

sions while also high-grading its contract portfolio.

Dave Lesar, CEO of Halliburton, had a different perspective to share during summer. “I can summarize this market in one sentence,” he said. “Today, our customers are focused on growing their businesses again rather than being focused on survival.” While Kibsgaard briefly touched on the fact that activity was picking up and clients were looking to invest in the future, Lesar made it a major point when updating analysts and investors. “There is a growing survivor mentality out there and you can’t estimate the positive change that we are seeing in our North American customers that we didn’t see earlier this year,” he said. According to Lesar, Halliburton intends to ramp up its own investment when its clients do the same at the end of Q3 or Q4.

Investor Groups Pursue Bakken, Other Plays Tailwater Capital LLC offered a reminder of why the current oil pricing environment should not be a hindrance to investing in the Bakken or other plays. The Dallas-based private equity firm infused $80 million into a Bakken-based fluid management firm called Goodnight Midstream (formerly 1804 Operating). Goodnight Midstream will use the money to expand its Bakken operations while it also looks to serve other shale plays. Joel Fry, principal at Tailwater, cited the ability of Goodnight Midstream to serve the Bakken successfully as a reason for its firm’s

EXPLORATION & PRODUCTION

Bakken Differential • Differentials continue to improve as North Dakota production falls and rail competes against pipe for barrels Enerplus Bakken Crude Oil Differential to WTI

-$4.00

US$/bbl

-$6.00

-$8.00

-$10.00

-$12.00

-$14.00

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

SOURCE: ENERPLUS CORP.

investment into the company. “Producers, particularly in the current environment, are focused on reducing capex and lease operating costs without impacting production flow assurance,” Fry said, adding that he was excited at the opportunity for Tailwater to expand into other shale plays.

Another Dallas-based investment firm turned to the Bakken to make a move into other shale plays. The Mitchell Group along with Redhawk Investment Group formed Redhawk Minerals Fund, a $58 million mineral rights acquisition fund. The money will be used to acquire mineral assets in Oklahoma’s STACK play. “The STACK play, now in its infancy, is being compared to the early days of the Bakken shale in North Dakota,” the company said. According to the company, the timing is perfect for mineral acquisitions as many mineral owners or sellers price-related expectations typically decline in proportion with the price of oil. “This can translate into the ability to acquire acreage at very competitive prices,” the com-

pany said, adding that mineral ownership in the STACK is highly fragmented.

IOG Capital LP, an upstream oil and gas investment firm that has previously invested in and been focused on the Bakken, also showed interest in the STACK this summer. The company said that since May, it had funded more than $260 million for the acquisition and development of assets in partnership with operators in drilling programs located in the Permian, STACK, Austin Chalk and Eagle Ford plays.

Operators Eye Active Bakken Future

Although investment headlines were mainly linked to the STACK or Permian, input from operators in the Bakken revealed that activity will remain strong throughout the year before picking up in 2017.

By the end of the year, Enerplus Corp. will spend roughly $15 million more than it had planned at the beginning of the year.

After spending $30 million in Q2, the company will end 2017 by spending $215 mil-

lion total. The additional spending will be put to use on downspacing testing, well completions and to buy facilities equipment that will be used in 2017. After focusing on its balance sheet this year like most operators did, Ian Dundas, Enerplus CEO, said the company intends to go back to pursuing growth in 2017.

Whiting Petroleum decided this summer it wouldn’t wait until 2017 to pursue Bakken growth plans. The Denver-based operator is adding a drilling rig in October and will also complete 16 drilled but uncompleted wells. Due to steadying commodity prices, the company intends to increase activity in the Williston Basin by an additional $50 million. The new operational activity plans will stabilize its production in the last quarter and give the company positive momentum heading into 2017.

Marathon Petroleum Corp. may have entered into an agreement to become a mainstay shipper on a new Bakken pipeline, but it isn’t extremely focused on the Bakken

EXPLORATION & PRODUCTION

‘Today, our customers are focused on growing their businesses again rather than being focused on survival.’

- Dave Lesar, CEO, Halliburton

DURABLE...

VERSATILE...

POWERFUL...

GUARANTEED Remote Controlled and Fixed Mount Lighting

800.557.0098 or visit golight.com 18

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

just yet. At $40 oil, the company will work to protect its balance sheet, said Lee Tillman, president and CEO of Marathon.

At $60 oil, the company will work on its STACK acreage. The Bakken will be second in line for activity. “A $10 move in pricing has a big impact on our operating cash flows,” Tillman said. “We’d be looking to redeploy in our U.S. resource base.”

The company’s ramp-up plan would be made quickly, he added, due to the company’s commitment to retain its early-career employees.

Continental Resources believes it is set-up for high-value future growth despite the summer sale of $222 million worth of Williston Basin acreage located in North Dakota and Montana. The company sold 68,000 net acres in North Dakota and another 12,000 net acres in Montana to a non-disclosed buyer. While the company will use the proceeds of the sale to reduce debt, it will not change its operational plans for the year.

Halcon Resources will still spud 10 to 15 gross operated wells and continue operating one drilling rig on the Fort Berthold Indian Reservation, despite its announcement that it will undergo a balance sheet restructuring effort through Chapter 11 bankruptcy. The company will also continue paying royalty owners, suppliers and vendors while it emerges from bankruptcy proceedings expected to be complete after summer.

Chuck Stanley, president of QEP Resources, helped to highlight what may have been one of the major trends regarding Bakken operators. Although capital reductions were widespread during the summer of 2016, production remained relatively flat, as Stanley highlighted. “Despite an almost 50 percent year-over-year reduction in capital expenditures, we expect to maintain a relatively flat production profile in 2016,” Stanley said.

Author: Luke Geiver Editor, The Bakken magazine 701-738-4944 lgeiver@bbiinternational.com

THEBAKKEN.COM

19

PRODUCTS & TECHNOLOGY

THE ABCs OF WASTE HEAT: Alphabet Energy’s Power Generation Combustor uses solid-state thermoelectric technology that the company says is robust, reliable and nearly maintenance free. The PGC is attached to the top of a flare stack where high-temperature PowerModules convert the waste heat into up 7.5 kilowatts of electricity for use on the well site.

PHOTO: ALPHABET ENERGY

Bringing thermoelectric tech to the Bakken In October, a new type of flaring solution based on thermoelectric technology and the use of waste heat to generate electricity will make its Bakken debut.

By Patrick C. Miller

Alphabet Energy Inc.— based in Hayward, California—has demonstrated its Power Generation Combustor in the Eagle Ford and Marcellus basins, as well as the oilfields of Alberta, Canada. The technology uses the company’s solid-state, ther20

moelectric PowerModules to convert heat into electricity.

Matt Scullin, Alphabet Energy’s CEO and founder, believes PGC is the solution to gas flaring and the emission of volatile organic compounds (VOC).

Although confidentiality agreements with the operator prevent

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

him from disclosing detailed information about the planned demonstration in the Willison Basin, he says, “It is exciting that we’re getting some units up into the Bakken.”

Earlier this year, Alphabet Energy announced a $23.5 million financing deal with Sch-

lumberger and participation from GM Ventures and Osceola Capital Management LLC. The company has been exploring opportunities in the Bakken and has made adjustments to deal with some of the region’s unique challenges.

“One of the main things

PRODUCTS & TECHNOLOGY

is that we’ve developed larger systems that can handle higher flows that are much needed in the Bakken where you have so much wellhead gas that’s being burned,” Scullin explains. “For the long term, the adjustment that we’ve made is going to larger systems because the gas flows up in the Bakken are just so high.

So that’s really the direction that the Bakken pushed us toward.”

The high initial production rates of Bakken wells caused Alphabet Energy to scale up PGC to meet the needs of producers.

“You have so much gas coming off the wells in the Bakken and a relative lack of infrastructure to take that to market,” Scullin says. “The customers are demanding a larger system there.

That’s where we realize we can help because our system is really quite scalable. It’s very much able to take larger numbers of power modules—our core technology—and put them in larger combustion systems.”

Scullin is a board member of the Heat is Power Association, a policy and advocacy trade group. He has won awards for innovation and entrepreneurship, including the World Economic Forum Technology Pioneer award. Before founding Alphabet Energy, Scullin held positions at X/Seed Capital, IBM and General Motors.

A materials scientist at the Lawrence Berkeley National Lab for four years, Scullin received his Ph.D. in materials science from the University of California Berkeley. He received a bachelor of science degree in materials science engineering from the University of Pennsylvania where he graduated magna cum laude.

In 2009, Alphabet Energy was formed in Berkeley, California, by Scullin and Peidong Yang, professor of chemistry at the University of California Berkeley. Their intent was to commercialize a new breakthrough in nanostructured materials after licensing key patents and developing manufacturing schemes for modern nanomaterials. In 2014, Alphabet Energy introduced the E1, the first-ever thermoelectric generator for industrial wasteheat recovery. According to the company, it’s the most powerful thermoelectric generator ever built.

Scullin has been to the Bakken and is familiar with the challenges of flaring and waste heat.

“When you’re driving through the Bakken, you notice that there are two streams of gas being wasted,” he says. “One is just coming right off the wellhead which is the source of the really dire lack of pipelines and gathering and collection infrastructure for natural gas.

“And then you also have gases being wasted coming off tank batteries,” he continues.

“These are VOCs or tank vapors. In total, you have an enormous amount of gas, an enormous amount of energy and an enormous amount of money that’s being wasted.”

Alphabet Energy’s efforts to expand into the Bakken haven’t been deterred by low oil prices.

“It’s an interesting time because there’s so much optimization going on right now in this low-oil-price environment,” Scullin says. “We have had enormous interest, despite the low prices.”

Technology At Work

A PGC cap is attached to the top of an enclosed flare, capturing high-temperature exhaust that passes through Alphabet Energy’s PowerModules. The flare exhaust is converted into about 7.5 kilowatts of continuous electrical power while still meeting on-site combustion requirements.

Scullin describes the PowerModules as solar panels for heat.

While thermoelectric technology is reliable and has been used by the oil and gas industry for years in small applications, Alphabet Energy’s breakthroughs enable it to scale up, producing kilowatts of energy rather than watts.

“We’re doing this with technology that we’ve been developing, scaling and commercializing for about seven years,” he notes.

“The oil patch is a very difficult environment to operate in, but because we have partnerships and customers in the automotive industry, we have to build it not only to survive in rough weather, but also on the bottom of a car where there’s vibration and thermal cycling.”

Alphabet Energy says its PowerModule is being used by an automotive OEM and tierone supplier to address the challenges of improving gas mileage and the need for increased automotive computing power. It’s expected to improve fuel efficiency by five percent, reduce the load on the alternator and generate the necessary electrical power to keep up with the electronics for cars of the future.

According to Alphabet Energy, the PGC is an integrated combustor and solid-state power generator that delivers reliable power and complies with the

U.S. Environmental Protection Agency Quad O performance standard for oil and gas production, transmission and distribution.

It uses waste gas at upstream and midstream sites to reduce venting and open flaring by eliminating the need for traditional on-site power generation and electrical grid connections.

The PGC is capable of replacing open and enclosed, combustors, vapor destruction units, and other incinerators at existing and new sites.

“The core technology isn’t brand new. We are coming into the market with good data points from the field at a competitive price,” Scullin notes.

Alphabet Energy says PGC delivers a simple and reliable combined combustor and power generator. The PGC can also accept pipe gas as a fuel source or supplement to waste gas in cases where waste gas streams are highly intermittent or unavailable.

Other advantages of the technology include:

• Power output remaining constant through fluctuations or downturn in waste gas.

• The acceptance of makeup gas to maintain rated power and efficient combustion during waste gas downturn.

• The addition of optional equipment to deal with highand low-pressure excess waste gas streams.

Alphabet Energy describes the PGC as a turnkey package that includes a PowerModulebased thermoelectric power generator; a Quad O compliant flare combustor; a radiator for cooling; power electronics to de-

THEBAKKEN.COM

21

PRODUCTS & TECHNOLOGY

From concept to completion, it all begins with Matrix.

PLAY-SPECIFIC TECH: The Alphabet Energy team has tweaked its gas utilization technology to process the high-flow rates and unique characteristics of associated gas produced from the Williston Basin.

PHOTO: THE BAKKEN MAGAZINE

From world-class engineering to full-scale construction, storage tanks to full terminals, across the oil and gas value chain when it comes to complete lifecycle solutions there is one name that consistently leads the industry: Matrix.

ĂĽ ĂĽ

MATRIXSERVICE COM 22 The BAKKEN MAGAZINE

SEPTEMBER/OCTOBER 2016

liver high-quality AC power; a forced air blower; and a transportable skid.

Scullin says PGC has a number of advantages over other gas capture technologies. â&#x20AC;&#x153;The technologies that have been out there to try to generate power from these waste streams have really suffered from two main issues,â&#x20AC;? he explains. â&#x20AC;&#x153;One is that theyâ&#x20AC;&#x2122;re based on cumbersome, high-maintenance pieces of

equipment that have high pressures and rotating machinery.

You donâ&#x20AC;&#x2122;t want to operate something that is complex and costly at all of your well pads.â&#x20AC;?

The second issue is that technologies using turbines or Rankin-type cycles donâ&#x20AC;&#x2122;t scale downward well, according to Scullin. â&#x20AC;&#x153;You really need a lot of gas to make them work,â&#x20AC;? he says. â&#x20AC;&#x153;You may end up having to pipe the gas to a central

PRODUCTS & TECHNOLOGY

‘It’s an interesting time because there’s so much optimization going on right now in this low-oil-price environment. We have had enormous interest, despite the low prices.’

(1*,1((5,1* <2 8 5 9 , 6 , 2 1

-Matt Scullin, CEO, Alphabet Energy

location to run a power plant, which just doesn’t make sense.”

PGC is modular, which enables it to be scaled up or down to meet the dynamic nature of Bakken wells.

“We’ve been able to develop the system where our power modules can slide in and out of a combustor,” Scullin explains.

“If you have a lot of exhaust, a big combustor, we can put in more power modules.”

In addition, because the system is solid state, Scullin says it’s also robust and reliable.

“It’s pretty much maintenance free,” he notes. “We’ve had it in the oil patch for a couple of years now where it’s been tested in a variety of extreme hot and cold conditions in different parts of the world.

It’s very well-suited for remote power generation.”

Growing concerns about state and federal regulations aimed at greatly reducing flaring and fugitive gas emissions make Alphabet Energy’s PGC a good fit for the oil and gas industry in the Bakken, Scullin said.

“Our whole goal is to help the industry with their problems around flaring and power

generation, and, in so doing, help the state, help the country and help the local communities with this big issue,” he relates.

“Oil companies and regulators at the state level fear that there could be more shut-ins of wells and significant fines with the amount of flaring being done in the Bakken,” he adds. “By generating power with the PGC, it will pay for itself by providing electricity that a customer would otherwise need to buy or use a diesel generator to produce.”

Scullin says the cost of PGC is competitive for the oil and gas industry and payback can fast.

“The savings it can provide in offsetting potential fines and shut-in wells is absolutely huge,” he says. “The payback there can be extremely rapid.”

Author: Patrick C. Miller Staff Writer, The Bakken magazine 701-738-4923 pmiller@bbiinternational.com

Visit kljeng.com today to see how you can be a part of our talented team!

M / F / V e t / D i s a b i l i t y / S e x u a l O r i e nT t HE atiB o nAKKEN.COM / G e n d e r I d e n t i t y 23

IN PLAY

QA Hess Corp. & Executive

Gerbert Schoonman, vice president for Hess’s Bakken Assets

From its lean manufacturing approach for safety and developing its Williston Basin assets to its continued support of its Bakken development plans, Hess Corp.’s perspective and place in the Bakken is exemplary. Gerbert Schoonman helps to lead Hess’s Bakken efforts. Along with the plan for Hess, Schoonman also has plans he hopes the entire Bakken industry can follow.

How would you What technology and describe your role in operational strategies the oil and gas industry have changed most and within your in the industry the past company? two years?

I’m responsible for Hess Corp.'s Bakken asset, which encompasses more than 550,000 net acres in North Dakota and is one of the top growth assets in the company’s portfolio. I consider my primary Schoonman role to create a safe working environment for our employees and contractors. Following that, I guide the team to eliminate waste and to increase efficiency and work toward continual improvement. In the end this creates value for our shareholders.

We’re dealing with a completely different price environment than we were two years ago, and this is pushing everyone in the industry to look at cost-efficient strategies. And within that, innovation is really important. It’s interesting that the industry actually benefits from going through these price downturns as this is the time when some of the greatest innovations and use of technology are applied.

At Hess, our culture is based on Lean manufacturing processes and technology thrives within a Lean culture. We use it when it helps us increase efficiency and eliminates waste.

When applied to our processes properly, technology yields significant improvements in safety, production, quality and staff engagement. One of the things we are applying in the Bakken in 2016 is we have gone from 35-stage fracks to 50-stage fracks as the norm, which we have seen deliver a 15 to 20 percent increase in initial production rates.

And we have been able to offset the cost of 15 extra stages with Lean efficiencies.

MULTI-WELL PAD DEVELOPERS: Many of Hess' new wells are drilled on existing, multi-well pads that already have several producing wells.

PHOTO: THE BAKKEN MAGAZINE

24

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

IN PLAY

What do you believe is an undertold part of the greater Bakken story?

I truly believe the most undertold story of the Bakken is the long-term phase of operating these wells. Everybody talks about the initial decline curves, but what they don’t talk about is how long these wells will produce. How we operate these wells long term is the next story. We expect most of these wells to produce for 30-plus years. Hess will have several thousand additional wells in the Bakken and we have developed a new operating model that will allow us to operate them more efficiently and with lower economic cost. Once we get this operating model fully in place, I believe the Hess Bakken will be even more profitable than it is today. This will give us a significant competitive advantage.

UNDERTOLD STORY: Although the Bakken is noted for its high initial production rates and decline curves, most wells will continue to produce economic results for 30-plus years.

PHOTO: THE BAKKEN MAGAZINE

In the next couple years, what should those linked to the Bakken be thinking?

Operators in the Bakken should be thinking right now about preserving their capabilities and the capabilities of those companies that support their activities so that when prices recover they are ready to hit the ground running. We are doing that by working very closely with our preferred suppliers as well as helping them to find greater efficiencies and to reduce waste. Doing this has already helped us to reduce our drilling and completion costs in the Bakken from about $11 million in 2012 to below $5 million per well today.

What has you excited about your role with Hess?

What gets me excited every day is working with the incredible team of people we have working for us in North Dakota as well as those in Houston who are supporting this operation. There is a continual flow of ideas being shared at every level to help us to

maximize value in the Bakken and to help us operate safer. Beyond that, I think it’s the dynamic nature of the Bakken. There truly isn’t another play like it in the world. I’ve done my fair share of offshore work in the North Sea, Brunei and Malaysia, which has its own rewards, but when you put an exploration plan into action it can take multiple years for you to see whether it was successful. In the Bakken, these results are almost immediate. We are constantly learning and constantly evolving. There’s never a dull moment.

What are one or two of the mostinfluential moments that helped develop your career?

In the Bakken we have a lot of fast-moving, heavy equipment and I recognize from firsthand experience that the human body is very fragile. This has ingrained in me that safety must be priority No. 1, 2 and 3. When – and only when – safe operations are in place can we even begin to talk about improving the business.

THEBAKKEN.COM

25

;u];uv -m7 1t bvbঞomv

The BAKKEN Magazine Marketplace

u; -rr;mbm] !;;v|-0Ѵbv_ +o uv;Ѵ=ĺ v +o u olr-m $orŊo=Ŋ bm7ĵ

)b|_ -ѴѴ o= |_; 1_-m]; 1 uu;m|Ѵ |-hbm] rѴ-1; bm |_; -hh;m -m7 -v 1olr-mb;v ]-bm m; l-uh;| v_-u;ķ l-m 1om|-1|v -m7 u;Ѵ-ঞomv_brv -u; ; oѴ bm]ĺ o bv |_; 0;v| ঞl; |o ;v|-0Ѵbv_ ou u;;v|-0Ѵbv_ o uv;Ѵ= -m7 0 bѴ7 o u ru;v;m1; bm |_; -hh;m v_-Ѵ; rѴ- ĺ

Live + OnDemand www.TheBakken.com/pages/webinar

GAIN MAXIMUM EXPOSURE

& CONTACT INFO Contact us today for more information service@bbiinternational.com or 866-746-8385

7 ;uঞv; |o7- -m7 u;-1_ |_o v-m7v o= obѴ ; ;1v -m7 v|-h;_oѴ7;uvĺ om|-1| v |o7- ĺ

ѶѵѵŊƕƓѵŊѶƒѶƔ ou v;u b1;Š00bbm|;um-ঞom-Ѵĺ1ol ĺ$_; -hh;mĺ1ol

26

The BAKKEN MAGAZINE SEPTEMBER/OCTOBER 2016

45,000

.com

ONLINE ADVERTISING Advertise Today & Track Your Results

7ULGHQW )ODUH &DSWXUH 5HFRYHU\ 6HUYLFHV 7UDQVIRUP \RXU UHPRWH DQG VWUDQGHG ZHOO VLWH IODUH JVSQ X LMW XS X LMW 4LSXS GVIHMX Â&#x152; 0ISRMHMOER

$FWXDO ½DUH DIWHU 7ULGHQW 1*/ &DSWXUH 5HFRYHU\ %DNNHQ a

4LSXS GVIHMX Â&#x152; 8VMHIRX 2+0 7IVZMGIW

$5( <28 5($'< )25 7+( 1(: )/$5( 5(*8/$7,216" Â&#x2C6; Â&#x2C6; Â&#x2C6; Â&#x2C6; Â&#x2C6; Â&#x2C6;

8VMHIRX 2+0 7IVZMGIW MW VIEH] XS LIPT ]SY QIIX XLI ERH ¾EVI GETXYVI PMQMXW XSHE] 8 VMHIRX 2 2+0 77IV ZMGIW MMW VVIEH] XXS LLIPT ]]SY Q QIIX XXLI EERH ¾¾EVI GGETXYVI PPMQMXW XXSHE] 7YTIVMSV 2+0 VIWYPXW [MXL 8VMHIRX´W TVSTVMIXEV] QSHYPEV ERH QSFMPI 2+0 WXVMTTMRK W]WXIQ 7TIGM½GEPP] HIWMKRIH JSV VIQSXI ERH WXVERHIH [IPP WMXIW 1YPXMTPI ¾EVI GETXYVI GSR½KYVEXMSRW EZEMPEFPI XS LERHPI ]SYV QQGJ H VIUYMVIQIRXW 1SHYPEV WOMHW EPPS[ IJ½GMIRX ERH PS[ GSWX VIPSGEXMSR XS RI\X [IPP WMXI

A DIVISION OF AMERICAN POWER GROUP, INC.

*SV EHHMXMSREP MRJSVQEXMSR TPIEWI GSRXEGX 8SQ 0SGOLEVX SV )H ;SPJ XJ ` TL

&216758&7,21 DEPENDABLE & RESPONSIVE SERVICE www.ae2sconstruction.com

PROJECT/PROGRAM MANAGEMENT DRILL & PRODUCTION PAD INFRASTRUCTURE WIRING/INSTALL ELECTRICAL INSTALLATION & UPGRADES INSTRUMENTATION & CONTROLS

SITE/FACILITY LIGHTING, SAFETY, & SECURITY ENERGY EFFICIENCY & PREVENTATIVE MAINTENANCE MAINTENANCE & SERVICE

AE2S

PERATIONS www.ae2sOperations.com

• • • • • • • •

24/7 Operations & Maintenance Performance Coaching System Optimization Customized Web-Based Operator Logs/Reporting System Integration with SCADA Technology Application & Piloting Regulatory Compliance & Agency Coordination Process & Technical Support