Basin Resources Summer 2017

4 bAsin resoUrces

sUMMer 2016

content Goodbye conocophillips, hello hilcorp

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Don Vaughan puBliSHER

Cindy Cowan Thiele EDiTOR

Dorothy Nobis Debra Mayeux CONTRiBuTiNG WRiTERS

Josh Bishop Curtis Ray Benally CONTRiBuTiNG pHOTOGRApHERS

prodUcTion increAses

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Suzanne Thurman DESiGNER

Clint Alexander Tonya Daniell SAlES STAFF

lacey Waite

Keep sTUdenTs’ And indUsTries ‘ needs AT The ForeFronT

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column

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dJr energy teams with Trilantic capital

best king of traffic congestion

column Gop fails tp overturn methane rule

companies donate furniture 13 to chapter houses Williams has new chairman 14 and executive vice president ritenour replaces 15 Tom Mitchell as devon ceo

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death spiral state?

www.basinresourcesusa.com

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WpX posted second 18 consecutive quarterly high learning about reclamation 19 search begins for new ipAnM executive director

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national news

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Majestic Media 100 W. Apache St. Farmington, NM 87401 505-516-1230 www.majesticmediausa.com Basin Resources magazine is published four times a year by Majestic Media. Material herein may not be reprinted without expressed written consent of the publisher. Opinions expressed by the contributing writers are not necessarily those of the publisher, editor or Basin Resources magazine. Every effort has been made to ensure the accuracy of this publication. However the publisher cannot assume responsibility for errors or omissions. © 2017 Basin Resources magazine.

www.basinresourcesusa.com • sUMMer 2017

6 BASIN RESOURCES

Goodbye ConocoPhillips, Hello Hilcorp Experts say sale should be viewed as a postive for the basin Debra Mayeux Basin Resources ConocoPhillips has been an oil and gas stronghold in the San Juan basin since the company first invested in the region in the mid-2000s. This was a time when natural gas was selling for $8 to $9, and the company knew it could make money here. but with the recent drop in gas and oil prices, the San Juan basin experienced an industry slowdown and ConocoPhillips announced its plans to sell its assets in the San Juan basin, as well as in Foster Creek Christina Lake and Western Canada’s Deep basin.

The oil and gas giant sold its San Juan basin assets to Hilcorp energy Company for up to $3 billion of total proceeds, com-

prising $2.7 billion in cash and a contingent payment of up to $300 million.

The Western Canada sale was to Cenovus, and it netted the company $13.3 billion in proceeds, comprising $10.6 billion in cash and 208 million Cenovus shares, valued at $2.7 billion.

A win-win ConocoPhillips Chairman and CeO ryan Lance called the sale a “win-win opportunity” for ConocoPhillips and Cenovus, saying it allowed ConocoPhillips to “rapidly reduce debt to $20 billion and double our share repurchase authorization to $6 million.”

Lance stated that the San Juan basin sale “significantly accelerates value from the

San Juan basin assets.”

ConocoPhillips believes both transactions will “materially reduce our exposure to North american gas and achieve an immediate step change improvement in our balance sheet and cash margins, while accelerating our return of cash to shareholders,” Lance said. “Our company will be more focused, far stronger financially, and well positioned to execute our disciplined returned-focused value proposition.”

Stock drops after sale Interestingly, a published statement from Janie Chermak, a natural resources and environmental economics expert at the university of New Mexico, showed a drop in ConocoPhillips stock after the company

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 7 announced the sale of the San Juan basin assets. “The market wasn’t particularly impressed,” she said.

Why Hilcorp is unique Shares company success, on Fortune list of 100 best places to work

Positive for the region In the same article from albuquerque business First, Carla J. Sonntag, president and founder of the New Mexico business Coalition, stated the sale to Hilcorp should be viewed a “positive sign for the region.”

She stated, “The new owner coming in is excited to be there. That will translate into more activity up there. They would not have bought those assets if they didn’t have plans to drill and explore.”

Company growth Hilcorp was founded in 1989 and is one of the largest privately held oil and natural gas exploration companies in the u.S. Headquartered in Houston, Texas, it is the largest oil producer in Louisiana, and operated in Texas, the Northeast u.S., and alaska’s Cook Inlet and North Slope.

The company employs 1,450 people, according to its website: www.hilcorp.com.

“Our formula is to grow the company by leveraging our core competencies and operational expertise,” the site stated. “Our proficiency in these key areas has resulted in significant growth over the last several years.”

* ConocoPhillips 34

Debra Mayeux Basin Resources Hilcorp, the Texas-based company that has purchased ConocoPhillips’ assets in the San Juan basin, has been ranked as one of the best places in the country to work.

The magazine Fortune ranks the top 100 companies for which to work as an employee and as a Millennial.

The magazine looked at 465 u.S companies and surveyed employees to see if they were pleased with their work environment.

Fortune ranked Hilcorp, No. 20 on the list, as one of the best places to work in the u.S. It also was listed as No. 41 for being one of the best Workplaces for Millennials, plus being listed as an “allStar” for its inclusion on these lists for the third year in a row.

Shares success “What makes Hilcorp unique and a great place to work is open-book management – every individual recognizes

SUMMER 2017 • www.basinresourcesusa.com

Hildebrand that they play a part in making the company successful and we all strive for the same goal,” one of the company’s surveyed employees said. “Hilcorp shares the success with each of us.”

Hilcorp employees have benefitted from programs such as the “Double Drive,” which was implemented in 2011.

* Hilcorp 34

8 BASIN RESOURCES

KeepIng students’ And IndustRIes’ needs At the foRefRont Barbara Wickman has a clear vision for the SJC School of Energy Debra Mayeux Basin Resources a Colorado woman with vast experience in the oil and gas industry has taken over the helm of the San Juan College School of energy. barbara Wickman, of bayfield, Colorado, became the school’s dean in January, when former dean randy Pacheco, left for a career in the private sector. Wickman,

who was doing oil and gas consulting work prior to joining the college, has experience in all aspects of the industry from production to business management.

She began her career in the industry with an 11-year stint at Mobil Oil, where she worked in geoscience, production and exploration. She went to night school in Denver to earn a master’s of business administration, and then worked as a business analyst for exploration.

Moves to Bayfield after 11 years in the city, Wickman and her husband, John, decided to move to an area outside of bayfield where they could raise their two children. She was given a job in 1996 working for the Southern ute Tribe. This was a time when coal bed methane was taking off.

Wickman soon worked her way up and became president of red Willow Production Company, a Southern ute extractive

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 9 industries business. “That was a tremendous opportunity,” she said. “Coal bed methane was growing fast.”

She stayed with the tribe for a number of years as interests in extractive industries grew and developed on the reservation.

“They wanted us to diversify into different kinds of plays,” Wickman said. “It was a very dynamic environment.”

She helped to grow the company from 16 employees to 130.

Interested in education While working, Wickman also took an interest in education. She grew up in a family of educators. both of her parents taught college. When an opportunity arose for her to run for a board at bayfield School District, she did so. She served on the board for 10 years and was board president for six of those years.

She is proud of assisting in the development of the bayfield education Foundation, which this year offered four $500 scholarships to bayfield High School students who were seeking college educations.

Wickman hopes some of those students, will choose San Juan College for their higher education. “San Juan College is doing a great job of reaching out to high

school students,” she said. “It also is a place where non-traditional students can come.”

Supporting the energy industry The School of energy has a large population of non-traditional students, as one of the school’s goals is to support the energy industry and its employees. Those employees have an opportunity at the school to receive hands-on experience in a number of areas including the extractive industries and electrical power.

“This builds a lot of confidence in the students,” Wickman said. “They can do it

and repeat it and do it in the field.”

The school has been promoting continuing education for energy employees as a means of boosting enrollment in the wake of the industry downturn in the region.

The downturn, Wickman said, was the result of lower commodity prices, so the school has reached out to industry to provide continuing education to its employees.

The school also has looked at diversification and is adding new types of industry training at its facility. The staff at the school is spending the summer updating the curriculum and developing new programs.

Working With tribal government

New School of Energy seminar series set for this fall Debra Mayeux Basin Resources understanding tribal governments, regulations and how those work with industry and business is the focus of a seminar series being offered by the San Juan College School of energy in the fall.

The Tribal energy Management Seminars program has been in the works for a number of years and will come to fruition this fall under the leadership of the

school’s new dean barbara Wickman, who has several years of experience working for the Southern ute Tribe as the president of its red Willow Production Company.

The five seminars offered this fall will last for one week each and can be taken individually or as a set. Taking all five seminars will be a requirement of the school’s new associate of applied science degree in tribal management. each seminar will result in a three-credit-hour course through San Juan College.

SUMMER 2017 • www.basinresourcesusa.com

“The goal is to educate people about Native america,” Wickman said, adding there will be a focus on american Indians working with the federal government and various regulating agencies. There also will be a focus on helping american Indians build capacity for their resources.

The Tribal energy Management Seminars will cover the Southern ute, ute Mountain ute, Jicarilla apache and the

* Tribal Government 33

10 BASIN RESOURCES “We have fabulous staff here,” Wickman said. “We have people who have a tremendous amount of experience and a great interest in being good teachers.”

The school is working with industry officials to develop a curriculum specific to their needs. “We will do a safety class at a facility. … Or develop classes for industry partners,” Wickman said.

Matching curriculum to new technology

trained workforce,” she said.

Another way to diversify the educational offerings is to invite nationally accredited organizations to the campus for presentations and classes. The National Association of Corrosion Engineers, or NACE, will fulfill this goal with two, one-week classes in cathodic protection.

“It’s very important in oil and gas and power generation,” Wickman said. “Corrosion control is also important to other industries.”

Another thing Wickman and staff are working on is to update the curriculum to match newly introduced technology and “add more advanced levels of training in certain areas,” she explained.

“Our instrumentation and controls program is applicable to other industries,” Wickman said, adding that the skills could translate to the manufacturing industry.

“If we start seeing a new type of industry coming, we can develop a very precisely

Expanding existing programs Wickman said she and her staff are working to expand existing programs such as the electric lineman power program and the commercial driver’s license, or CDL, program.

Students of the CDL program now have the opportunity to earn 30 credit hours and receive a certificate. The classes include loading and unloading, documentation and

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paperwork, and electronic systems. “We are trying to get the program qualified for federal financial aid,” Wickman said.

It’s a good fit When she heard about the job at SJC, Wickman said she knew it would be a good fit, and she was right. She has enjoyed her first six months on the job and is looking to the future success of the school and its programs.

“With a solid background in management, education, and the energy industry, Barbara has a clear vision for the future of the School of Energy,” said Ken Johnson, School of Energy Petroleum Technology Program coordinator and former SOE interim dean. “From developing online programs to securing partnerships that will assist in updating and obtaining state-ofthe-art equipment – she works closely with the faculty and staff to keep the students’ and industry needs at the forefront.”

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BASIN RESOURCES 11

Best kind of traffic congestion More oil field trucks are back on county roads As I drive around San Juan County these day I notice an increase in traffic – good traffic, the kind of traffic we’ve missed recently.

It’s oil field traffic, and I’m delighted to share the streets and roads with it once again. For those of us in San Juan County, the lack of oil field traffic meant more than just fewer trucks on the road. It meant fewer jobs and, for those of us who depend on the oil and gas industry for revenue, it meant addressing challenges we hadn’t faced in some time.

As the mayor of the city of Bloomfield, my community felt the lack of revenue from our oil field friends and neighbors and the gross receipts taxes or GRT they brought to the city’s coffers. We’ve faced a $2.2 million drop in GRT since 2015.

That’s $2.2 million that the city needs in order to continue providing the infrastructure, the services and the jobs Bloomfield requires to fulfill our obligation to our residents and others who visit our city.

The city was forced to tighten its belt – just like the families of those who lost their jobs with the lessened activity in the oil and gas industry. Elected officials and city staff looked at ways to cut spending, while minimizing the effect of lack of revenues on our citizens. It hasn’t been easy and it hasn’t been fun.

City employees took a 3.5 percent pay cut and a cut in their health care benefits.

Expenses were cut across the board and – the most difficult decision – jobs were eliminated and employees were affected by layoffs. The city is currently functioning with 27 fewer employees than we had in 2015 – which means that in addition to

scott eckstein Mayor city of BlooMfield

taking a pay cut, current employees are doing their own jobs and taking on new responsibilities for jobs now vacant.

With less revenue coming in through our GRT, we’ve been concerned about the possible lack of donations we’ve enjoyed in the last several years to help us fund this uears Fifth of July Fireworks Display.

Our oil field industry friends are facing the same economic challenges the city is, and we knew those friends were being forced to make budget cuts as well.

As is typical of our community, however, our friends in the oil and gas industry and the wonderful people who live in and near Bloomfield, have been generous in their donations to our fund, to ensure families and visitors will enjoy our fireworks display again this year.

Businesses that want to make sure the Fifth of July continues to be a “blast” include Halo Services Inc., High Desert Safety, SunRay Park and Casino, Alpha Omega Counting, Wagner CAT, Largo Tank and Equipment, Adobe Contractors Inc., Bloomfield Storage, San Juan Regional Medical Center, Souder Miller & Associates and San Juan County. In addition, Bloomfield residents have made generous contributions as well. Rose Gonzales, Jerrold and Julia Crockford, Patty Bowers, Craig and Linda Corwin,

SUMMER 2017 • www.basinresourcesusa.com

Edward and Lecia Israel and Richard Eckstein have contributed to the fireworks display fund.

We understand it isn’t always easy and/or possible for people and businesses to include community donations in a budget that is already strained to cover the necessities. Because we understand that, we are all the more appreciative for the donations that have been given – and that we continue to receive – so the city of Bloomfield can offer a fireworks display that the entire family can enjoy. We are blessed to have the support of so many and we can never thank our donors enough.

My wife, Tonya, has stated many times that Bloomfield is the Little City with the Big Heart, and she is so right in her observation. Our oil field partners, our business partners, and our friends who live in our wonderful little community realize that it is the tough times that bring people together for the good of the community.

So, while Bloomfield – and countless other communities in New Mexico – continue to struggle to make ends meet, to keep people employed and to provide the best quality of life it can, we are grateful for the donations and the support of those who so generously provide it.

While the oil field industry may never bounce back as high as it has in the past, that industry and those countless businesses that provide support to the industry, will always do their best to give back to the communities they serve.

It is that partnership, that team work, that “can do” attitude that creates a positive environment that benefits us all.

12 BASIN RESOURCES

GOP Fails tO Overturn methane rule Battles over methane releases and regulatory review far from over The federal “Methane Rule” – pushed through in the waning days (November 2016) of the Obama Administration and opposed by the oil and gas industries – recently faced a repeal attempt in the U.S. Senate. The Rule, as the Bureau of Lands Management put it, was designed to “reduce wasteful flaring, venting, and leaks of natural gas” on federally-owned lands – including tribal lands.

According to the center-right American Action Forum, The BLM Rule – if adopted – will cost up to $279 million annually, mostly borne by small businesses that would pay on average $42,300 – 63,600 each for compliance. The Rule is expected to cut annual emissions by 4.5 million tons – CO2 equivalent – which is about 0.065 percent of U.S. emissions relative to 2005 levels.

Efforts to overturn the rule proved unsuccessful in early May when the Senate voted 49-51 not to overturn the act using the – prior to the Trump Administration – littleused Congressional Review Act. Republicans John McCain (AZ), Lindsey Graham (SC), and Susan Collins (ME) voted with Democrats who opposed repeal.

The CRA was crafted by former Representative Newt Gingrich in the 1990s due to increased concerns over unelected bureaucrats engaging in “lawmaking.” The Act aims to prevent outgoing administrations from pushing through so-called “midnight regulations” – rules finalized in the last months of a presidency – by giving Congress 60 days to review new rules. (Days only count while Congress is in session.) If a majority of lawmakers vote to reject a rule, and the president signs the resolution, the rule is vacated. Critically, the agency isn’t allowed to try again to write a similar rule unless lawmakers approve.

Since the CRA was created, lawmakers

Paul GessinG President riO Grande FOundatiOn

had used it only once to erase a rule – a 2000 regulation related to workplace ergonomics. The Trump administration and the current Republican Congress successfully used the CRA 14 times (a full list is available here: https://en.wikipedia.org/wiki/Congressional_Review_Act), but lost narrowly on the Methane Rule.

What does this mean for industry? The Methane Rule is a classic case of government stepping in to regulate a problem that industry is already solving. Methane emissions from natural gas have declined 21 percent since 1990 while production has increased by 47 percent.

Producers in this field have been making great strides in reducing “venting and flaring” through increased research and technologies. It makes economic sense to capture and sell as much product as possible, not to release it into the environment.

An estimated 2,200 New Mexico jobs would be preserved by overturning the Rule. Instead of supporting their state’s economic interest, both of New Mexico’s Senators (Udall and Heinrich) actually led the charge to preserve the Rule.

The battle is not over and things could change dramatically on this issue. The Department of the Interior plans to suspend or revise the methane rule through a rewrite process. Efforts to revise or repeal the rules may take years, with proposals to change or eliminate federal regulations requiring public hearings, and expert analysis needed to

help overcome any legal challenges.

A lawsuit filed by the Western Energy Alliance or WEA and the Independent Petroleum Association of America (IPAA), which argues that the Bureau of Land Management lacks statutory authority for the creation of an air quality regulatory program, has been delayed for now at the request of the Trump administration as it reviews the Methane Rule itself. Shockingly, New Mexico’s Attorney General Hector Balderas had signed New Mexico on to the list of groups defending the Methane Rule alongside California and various environmental groups.

Another important outgrowth of this and other recent uses of the CRA is the fact that New Mexico Sen. Tom Udall has introduced legislation (S. 1140) called the SCRAP Act to completely repeal the CRA. As Udall said in a press release, “Republicans’ abuse of the CRA this year was a gift to their special interest campaign donors, from billionaire bankers to big industry polluters.”

One can certainly argue whether prohibiting future regulations from being promulgated by federal agencies is the ideal approach, but when unelected bureaucrats can easily put costly regulations in place with little Congressional oversight, the CRA clearly exists for a valid reason.

The regulatory process is lengthy and bureaucratic. With a pro-energy Administration in the White House, the Methane Rule won’t take effect in its current form anytime soon, but the battles over both methane releases and regulatory review are far from over.

Paul Gessing is president of the Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting liberty, opportunity, and prosperity for New Mexico.

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 13

NTEC, BisTi FuEls Companies donate furniture to chapter houses Debra Mayeux Basin Resources Chapter houses on the Navajo Nation are reaping the benefits of the disposal of office furniture from Navajo Mine.

Navajo Transitional energy Company, or NTeC, along with bisti Fuels, spent two days in March delivering and setting up office furniture in 14 chapter houses and non-profit organizations across the Navajo Nation.

“We are pleased to help the chapters on the Navajo Nation with excess office furniture that we have from Navajo Mine,” NTeC CeO Clark Moseley said. “The office furniture is usable for many years to come.”

Navajo Mine, which is operated by bisti Fuels, will be remodeled, so there was a surplus of office furniture on site. The furniture was first taken to the Shiprock offices of NTeC, where it was decided which organizations would benefit from excess pieces.

“We want the furniture to be used,” said rick Ziegler, President of North american Coal bisti Fuels. “It served Navajo Mine and now can be useful elsewhere and we

want to strengthen our relationships with chapters throughout the Navajo Nation.”

The company reached out to locations as far away as Hard rock Chapter, near Hopiland in arizona, and Mexican Water, on the arizona and utah border. representatives from these and other chapter houses visited Shiprock to select their choices of desks, chairs, filing cabinets, shelving and other furniture.

“We’re here to get furniture for our Veterans Center and new Senior Citizen Center,” said Martha Saggboy, chapter manager for the Mexican Water Chapter.

“Furniture is expensive for the chapters.

Thank you to NTeC and bisti Fuels for helping our chapter.”

NTeC then hired local college students to move the furniture.

SUMMER 2017 • www.basinresourcesusa.com

“We want to help our Navajo students too,” said Steve Grey, NTeC director of governmental and external affairs. “attending college is becoming more and more expensive. We want to help out where we can, so we contract students when we need extra help.”

The following chapters and organizations so far have received office furniture: Sheep Springs, beclabito, red Valley, Hard rock, Mexican Water, Shiprock, Nenanezad, San Juan, red Mesa, Two Grey Hills, T’iis Tsoh Sikaad, and Nazlini Chapters, along with the Healing Circle, Shiprock Veteran’s Center and the First baptist Church in Shiprock.

With continued renovations, NTeC stated in a press release that more office furniture might become available in the near future, and the company will continue to reach out to organizations within the reservation.

“We are a company that belongs to the Navajo people and we want to do what we can to help where we can,” Moseley said.

For more information contact Melissa Kelly, 505.278.8637 or Melissa.kelly@navajo-tec.com.

14 BASIN RESOURCES

Williams Companies has new chairman of the board Debra Mayeux Basin Resources Stephen W. bergstrom recently was elected chairman of the board for Williams Companies, Inc. He immediately replaced Dr. Kathleen b. Cooper, who will become the chair of the board’s Nominating and Governance Committee. bergstrom joined Williams in august 2016. He is a director on the board of american Midstream Partners, where he was the president and CeO from May 2013 to December 2015. He led that company through a period of growth and increased its geographic and operational diversity by enhancing fee-based cash flow. He also worked for arcLight, Natural Gas Clearinghouse and Dynergy.

“The Williams board and our entire organization are focused on execution of the

company’s natural gas-focused business strategy and positioning Williams to deliver long-term, sustainable shareholder value and growth,” bergstrom said. “I’m especially honored to lead a world-class board of directors committed to independence and strong corporate governance.

This commitment will continue under Bergstrom Kathleen’s leadership of the Nominating and Governance Committee.”

Cooper is the president of Cooper Strategies International LLC, and she served as the under secretary for economic affairs of the u.S. Department of Commerce from 2001 to 2005. She also worked as the chief econ-

omist for exxon Mobil Corporation. She serves as the director of Deutsche bank Trust Corporation and Deutsche bank Trust Company of the americas.

“I want to thank Kathleen for her superb leadership and guidance during a critical time in her company’s history,” Williams president and CeO alan armstrong stated.

“We are fortunate to have such a deeply experienced board of directors. The entire Williams’ team looks forward to further executing on the board’s vision of focusing on our core natural gas business and delivering predictable returns to our shareholders. I also appreciate that the board supports our commitment to operational excellence and continually enhancing the safety culture at Williams.”

The Williams board of Directors consists of 11 members, 10 of whom are independent.

Dunn new executive vice president at Williams Debra Mayeux Basin Resources Micheal G. Dunn recently was appointed as the executive vice president, chief operating officer of Williams Companies, Inc., effective February 27.

The position was a newly created one for Dunn, who will focus on optimizing operations to enhance Williams’ competitive advantage while implementing a longterm growth strategy, according to a press release.

Dunn, who most recently served as president of Questar Pipeline and vice president of Questar Corporation, will report to Williams’ President and CeO alan armstrong.

“We are very excited that Mike is joining the Williams’ management team as chief operating officer,” armstrong stated.

“He is an outstanding leader with extensive engineering, project management and operating experience in our industry, including more than 25 years in technical and executive management positions at natural gas transmission and pipeline companies. We look forward to benefitting from his expertise as we propel Dunn Williams into its next stage of growth as we build out the nation’s key natural gas infrastructure.” armstrong added that this appointment is part of an effort to streamline Williams’ business strategy in a way that “aligns with our proven natural gas-focused strat-

egy, and will allow us to even more rapidly adapt to evolving market conditions and demand.”

Dunn said, “It is an honor to be joining Williams at such an exciting and important time for the company. I look forward to working with alan and the talented employees of Williams to cement Williams’ position as North america’s premier natural gas infrastructure company.”

Dunn began his career with Williams as an operation engineer and spent 14 years with the company in a variety of technical and leadership roles. He also served as president and CeO of PacificCorp energy, and he was president of Kern river Gas Transmission Company.

He holds a bachelor’s degree in civil engineering from the university of Oklahoma, and he is a registered professional engineer in Oklahoma.

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 15

Ritenour replaces Tom Mitchell as Devon CEO DEbRa MayEux Basin Resources OKLaHOMa CITy – Jeff Ritenour has been elected to serve as the executive vice president and chief financial officer of Devon Energy Corporation. Ritenour was most recently the company’s senior vice president of corporate finance, investor relations and treasurer.

Ritenour replaces Tom Mitchell, who is leaving the company to pursue other interests, according to a press release from Devon. “We appreciate Tom’s service to Devon and wish him all the best in his future endeavors,” said Devon President and CEO Dave Hager Ritenour joined Devon in 2001 and has had a number of leadership positions within the company, among them various

financial and commercial roles, including senior vice president of investor relations and vice president of acquisitions and divestitures.

Ritenour said he is excited to be named the chief financial officer. “I look forward to working with the executive management team and serving Devon’s shareholders.

Ritenour Devon has a strong finance team, and we’re well-situated to build upon our financial position as we successfully execute our operational strategy,” he said.

Hager congratulated Ritenour on the “well-deserved” promotion, in a prepared statement. “Jeff is a proven leader who has had significant influence on the execution of our strategy and the growth of our company. He has been an integral part of our finance team for many years and has the full confidence of our board of directors, senior management team and his finance and investor relations teams,” he said. before joining Devon, Ritenour was affiliated with the international accounting firm Ernst & young in Dallas, Texas.

He is a certified public accountant and holds a bachelor’s degree in accounting and a master’s degree in business administration, both from the university of Oklahoma, according to a press release from Devon.

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16 BASIN RESOURCES

Death spiral state?

New Mexico 1 of 11 states on Forbes list of fiscal hellholes An article by William Baldwin that appeared in the November 25, 2012, issue of Forbes Magazine declared New Mexico one of 11 states that was considered a “death spiral state.”

In the article Mr. Baldwin stated, “Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner, or welfare recipient. A maker is someone gainfully employed in the private sector.”

He also stated that the taker count is the number of state and local government workers plus the number of people on Medicaid. A second element in the death spiral list, according to Mr. Baldwin, is a scorecard of state credit-worthiness, done by a money manager, which focuses more on dollars than the number of people. The formula by the money manager downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.

Paul Gessing, president of the Rio Grande Foundation, a research institute that focuses on providing information on limited government and economic opportunities, wrote a column for the Errors of Enchantment web site on February 23 that questioned whether New Mexico’s death spiral has begun. “… declining revenues leading to tax hikes, which lead to businesses and productive citizens leaving, which in turn, leads to declining revenues. ...” is the primary reason Gessing believes our state is, indeed, entering into that death spiral state.

Much of New Mexico has become dependent on oil and gas revenue for its sus-

ranDY pachecO a-plus Well servicing tenance. While Albuquerque and Santa Fe enjoy a far better and much healthier economy than those of us in the San Juan Basin and other communities that depend on oil and gas for our livelihood, the state’s struggles with balancing a budget mirrors the challenges of personal budgets many of us have faced in the last several years. Layoffs, pay cuts, transfers out of the area, and rising taxes have hit hard in San Juan County. The downturn in the oil and gas industry has affected us more than most. Companies are cutting their workforces, transferring employees to more lucrative areas and cutting back their budgets.

The payrolls of those companies that fueled our local gross receipts taxes have declined, creating cutbacks in local government budgets as well as at the state level. The push for the expansion of the film industry, encouraging retirees to move to the Land of Enchantment, and providing perks to new companies moving into New Mexico are honorable and, in the long run, will likely pay off. What we need now – in San Juan County and in New Mexico – are leaders who understand the importance of cutting budgets while maintaining a positive morale for their employees, who know that we must not only take care of today, but plan wisely for tomorrow, and we must never forget the challenging times we are facing today.

Most of us in the oil and gas industry

know this downturn is temporary. The industry will rebound once again, but probably not to the highs we have enjoyed in the past. In addition, we must recognize the importance of hiring people who understand the industry, the area, local and state politics, and that this part of the country is as unique as the sunrises and sunsets that are the most beautiful on Earth.

We must invest in local people who have the background, the leadership and the knowledge of the Four Corners and the industry. We must change our attitude that “outsiders” are the only ones who will bring a vision and a success that will change the way our companies do business.

We need to seek out and hire people who know the community and the importance of building relationships between education, healthcare and government. We must find leaders who know that success – of any kind – comes by reaching out to others, sharing ideas and visions, and working together to ensure the greater success of every business and every industry.

We need to appreciate and take advantage of the talents, experience and knowledge in our own backyard.

In addition, we need to reach beyond the state lines that surround us and, all too often, restrict us. We need to look at areas that don’t have the quality of life we enjoy in San Juan County and New Mexico, and we must have a group of community leaders who will take our “show” on the road and share all that is good about our area and the benefits of doing business here.

In 2012, Arizona noticed how many new businesses were moving into California and the Greater Phoenix Economic

* Column 32

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 17

DJR Energy teams with Trilantic Capital Debra Mayeux Basin Resources a 2016 purchase by DJr energy, LP, of more than 5,000 acres in the San Juan basin, left this Colorado-based company and its partners touting the economic viability of moving its oil and gas interests into the Gallup formation.

DJr, which has extensively mapped and analyzed formations throughout the rocky Mountains, along with its partners Trilantic Capital Management L.P., and Waveland, stated that a review of more than 35,000 electronic logs, which made a regional geological model of the San Juan basin showed economic viability during the next six to eight years, according to a press release from the three corporations.

“The San Juan basin is expected to yield strong economic results in an environment of rising hydrocarbon pricing,” the release stated.

“We believe the San Juan basin is at an attractive stage of its development, and we are thrilled to partner with an experienced rockies-focused management team and Waveland to pursue this growth opportunity,” said Glenn Jacobson, a partner at Trilantic North america.

Trilantic is a private equity firm focused on control of and significant minority investments in the areas of business services and consumer and energy sectors in North america. It joined with Waveland, a private equity firm with a focus on investing in oil and gas in the u.S. The two companies joined with the Denver-based DJr

with the intent of investing in the San Juan basin. under this partnership, DJr is led by its CeO David H. Lehman, a geologist and entrepreneur with more than 40 years of experience in the oil and gas industry.

Lehman, who started his career and worked for 27 years with exxon, is credited with successfully building and selling two oil and gas companies for profit.

“We are excited to team up with two experienced oil and gas financial partners and build a highly profitable business in the San Juan basin of New Mexico,” Lehman said.

DJr energy “is dedicated to establishing a premier position in the San Juan basin, building upon existing operations and reserves via the drill bit,” the company stated.

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18 BASIN RESOURCES

WPX posted second consecutive quarterly high for oil output DEbra MaYEuX Basin Resources WPX Energy announced a high oil output for the first quarter of 2017, and approved a quarterly dividend of $0.78125 per share to holders of the company’s 6.25 percent Series a Mandatory Convertible Preferred Stock.

This came as the company boasted a double-digit oil volume growth over the past five years and a quarterly production level of 55,000 bbl/d, after the startup of 14 new wells that began flowback in april, according to a press release from WPX. In the San Juan basin, WPX had its first completion of 2017 – the 71th in the northeast portion of the West Lybrook unit.

This posted an initial production of 1,410 bOE/d, which was 74 percent oil.

In the Willitson basin, WPX completed nine two-mile laterals on three pads during the first quarter. These had a peak rate of 3,343 bOE/d, which was 81 percent oil

on the Grizzly 24-13HG well.

“I like how our growth story is unfolding,” said president and CEO rick Muncrief. “WPX 2.0 is all about showing what we can do with an oil-focused portfolio that’s anchored by assets in one of the world’s most prolific plays. The keys to achieving our ambitious goals for the next four years in continued fundamental execution.”

Muncrief was speaking about the Delaware basin, where WPX acquired assets from Panther Energy Company and Carrier Energy Partners. This provided WPX with approximately 18,000 net acres, more than 900 gross undeveloped locations and a two-rig program.

WPX also acquired a 17,900-acre land parcel in Culberson County of the Delaware basin. This $38 million purchase is “exploratory in nature,” and there are plans to commit at least eight wells to the land by 2021, according to a press release from the company.

In addition to land acquisitions, WPX signed an agreement with a major pipeline company to begin shipping natural gas from the Waha hub in the Permian basin of Katy, Texas, in November of this year. This will provide the company with multiple sales outlets through the Katy area.

The company’s total production volumes for the first quarter of 2017 were up 1 percent from the fourth quarter of 2016 and were 12 percent higher than the same period last year. “Liquid volumes accounted for 64 percent of the first-quarter 2017 production,” the press release stated. There was a new quarterly high for oil volume production, which was at 46,100 barrels per day. This brought oil volumes up by 3 percent over the last quarter and up 11 percent from the same period last year.

WPX also “completed 25 gross operated wells in its three basins during the first quarter, and participated in another four gross non-operated wells in the Delaware basin,” the press release stated.

WPX president named the Executive of the Year DEbra MaYEuX Basin Resources The publication, Oil and Gas Investor recently honored WPX’s president. rick Muncrief, chairman president and CEO, was named the Executive of the Yearat the Energy Capital Conference in austin, Texas.

Muncrief was selected by the magazine for “completely retooling the portfolio and cost structure of the company to become one of the leading performers in its class with ample room to grow,” according to a press release from WPX. “I’m personally humbled but grateful to

see WPX in the spotlight,” Muncrief said.

“This honor speaks to the tremendous efforts that our entire organization has accomplished.”

Muncrief joined WPX in May 2014.

Since that time he has overseen more than $6 billion in transactions to increase the company’s gross drillable locations seven-

fold. “In a span of just over 18 months, WPX amassed more than 120,000 net acres in the Permian’s Delaware basin, where it has an estimated 6,400 gross drillable locations,” the company stated in a press release.

Muncrief, who became the 14th recipient of the magazine’s award, is a member of the american Petroleum Institute and the american Exploration and Production Council.

He has 36 years of upstream and midstream experience. When named Executive of the Year, he joined other honorees such as Harold Hamm, of Continental resources; Chuck Davidson, of Noble Energy; Scott Sheffield, of Pioneer Natural resources and Jim Hackett, of anadarko Petroleum. www.basinresourcesusa.com •SUMMER 2017

BASIN RESOURCES 19

Learning about recLamation Navajo Prep students collect seeds on reclaimed Navaho Mine land Debra Mayeux Basin Resources Navajo Preparatory School students had an opportunity to assist in reclamation efforts at Navajo Mine during a February 22 field trip to the site, which is owned and operated by bisti Fuels.

“We welcome the students from Navajo Preparatory and hope that this is the beginning of our efforts to become more accessible for students to learn about Navajo Mine and what we do here,” said rick Ziegler, president of bisti Fuels, the mine managing company at Navajo Mine.

The students spent the day gathering seeds from the Four Wing Salt bush, a type of atriplex from the plant family Chenopodiaceae, according to Tim ramsey, environmental specialist for bisti Fuels. “There are over 20 known species of atriplex. The one we were collecting is a cross between atriplex canescens and atriplex obovata,” ramsey said.

“The seeds will be sent to a lab and be mixed into a special seed blend designed specifically for Navajo Mine,” he added.

The students, from the school’s sophomore class, the Venture Crew and the

Gifted and Talented Club, were part of an annual seed collection activity at Navajo Mine. “rather than hiring a contractor to complete the seed collection, each year Navajo Mine selects a local non-profit organization or school organization to complete the work,” according to a press release from the Navajo Transitional energy Company, or NTeC, which owns the mine.

Navajo Prep in turn received a financial donation from NTeC. “I’m pleased to see local students come to Navajo Mine and experience some of the efforts we put forth to reclaim the land,” said NTeC CeO Clark Moseley. “being Navajo owned, we have a duty not only to inform the Navajo people about how we help the Navajo Nation, but also to provide an opportu-

Our process? We listen. Really listen.

Kristy Visconti Financial Advisor .

4801 N Butler Suite 7101 Farmington, NM 87401 505-326-7200 www.edwardjones.com

Member SIPC

SUMMER 2017 • www.basinresourcesusa.com

nity for Navajo students to interact with the mine.” as part of the project, Navajo Prep Science Teacher Kevin Keeley taught the students about reclamation projects and coal mining, in order to help them understand that “coal mining isn’t as bad as it has been portrayed to be,” according to an NTeC press release.

“I wanted them to come out and see the land, see how it’s better than before,” he said.

The land set to be reclaimed was first used as a mine in the 1970s. after the project is complete it will be used for the grazing of livestock.

“It’s nice to pick seeds and give back to nature,” said Irvilinda bahe, a sophomore, who filled a five-gallon bucket with seeds.

“I enjoyed picking seeds with my friends,” said Taylor Lii’bil Naghahi, a senior.

Keeley said he hoped the students would gain a sense of ownership of Navajo Mine since it’s Navajo-owned.

“Overall, I’m hoping that they would get the idea that this is ours,” he said.

The students ended up collecting approximately 16 large bags of seeds.

20 BASIN RESOURCES

Search beginS for new executive director Karin Foster leaves Independent Petroleum Association of New Mexico Debra Mayeux Basin Resources after 12 years of service, executive director of the Independent Petroleum association of New Mexico, has left her position.

This leaves the organization with big shoes to fill as it searches for a new executive director, one who is able to communicate not only among association members, but also to promote oil and gas within the Foster state and throughout the Southwest.

The search for a new executive director

began in the spring, and with resumes accepted through May 26. On May 1, Pam Garlinger, director of operations, was named as interim manager.

The Independent Petroleum association of New Mexico, or IPaNM, became the voice of the state’s independent oil and gas producers in 1978. It is a member-driven organization with the purpose of promoting oil and gas, while also influencing stakeholders and decision makers to protect the industry. an executive director should promote the

goals of the organization while providing “a strategic vision and proactive leadership,” according to the organization’s job description for a new executive director. The new director also will be required to oversee marketing and member-related activities and provide outreach and communication.

“IPaNM would like to thank Karin Foster for her tireless service as executive director for 12 years,” said Tom Mullins, organization president. “Karin’s knowledge and passionate advocacy for independent producers will serve her well in her future.

We wish her continued success.”

For more information about IPaNM contact Garlinger, pam@ipanm.org.

www.basinresourcesusa.com • SUMMER 2017

22 BASIN RESOURCES

Production increases While the Basin has some new players it’s too early to say the bust is over DOROTHY NOBIS Basin Resources It was just three years ago, but to most of the residents of San Juan County, it seems like an eternity.

The oil and gas industry, that is so important to the local economy, was preparing for a new boom that was predicted to give San Juan County the same rush of dollars flowing into local coffers that North Dakota was experiencing.

While industry leaders in San Juan County did not expect the thousands of people to invade the San Juan Basin looking for the jobs that were certain to be had, as was the case in Williston, N.D., there was optimism that the Bakken Shale would have a positive effect on the local economy.

Prepping for a boom In an article for the Energy Media Group in March 2014, writer Lydia Gilbertson wrote, “Northwestern New Mexico is prepping for a new oil and gas boom in a region that’s pumped out natural gas for decades and where those resources were once thoughtfully developed.”

Horizontal drilling would be the trump card the San Juan Basin needed and the cards seemed to be in favor of a prospering and productive industry.

However, as most card players know, the cards dealt aren’t always the cards that win.

The price of oil, which had risen to almost $150 per barrel from 2000-2008,

dropped, but managed to maintain a price per barrel between $100-$125, according to an article on the Investopedia website.

Bottom drops out By the end of 2014, the cost of a barrel of oil began to drop once again. By early 2016, oil dropped to below $20 a barrel, but bounced back to more than $50 a barrel by the end of the year. Experts, including those at the New York Times, believe oil and gasoline prices will recover this summer, when travel and vacations peak.

Won’t last forever Tom Dugan has been in the oil and

gas industry “all my life,” he said proudly.

“I’m 91 (years old) and my dad worked in the oilfield as a pumper,” Dugan said.

“He wasn’t a big thinker, but he was a good worker.”

As the owner of Dugan Production Corp., Dugan is always optimistic and positive about the industry, and this slump hasn’t changed that.

Dugan “It won’t last forever,” he said. “People are using more oil and gas all over the world. In the (San Juan) Basin, there aren’t any wells being drilled now, but

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 23 people will pay more for it and (eventually) more wells will be drilled.”

Dugan drills shallow coal bed methane wells, which he said he enjoys, “and I make some money with it once in a while.”

Taking care of wells Dugan Production has about 1,000 wells, and Tom Dugan’s love of his business and the industry extends to each one of those wells.

“You have to take good care of your wells and know how to do that,” he said.

“I have a good time getting the most out of those wells. I treat them like a valuable asset, because they are.”

“I enjoy taking nothing and making something (a well) out of it,” Dugan said.

“It is really enjoyable. Some of my leases weren’t (originally) worth much, but now they are.”

United States will become more energy independent; however, this growth will be slow, but stabilized.”

“But be cautious,” Pacheco added.

“OPEC (Organization of Petroleum Exporting Countries) can still shape the price, so oil prices hang in the unknown market. Natural gas will stabilize a bit more than oil. We don’t import gas, but that stabilization could be impacted by oil prices.”

Bust will change the industry This latest bust with which the world is struggles will change the industry, Pacheco said. “OPEC is struggling to hold on to the past, so its future will be defined by demand. I think we will see more acquisitions and mergers and equity deals that will reshape the industry.”

“The most important lesson will be the U.S. will now influence the price of oil with OPEC and Russia,” he added.

Rebalancing Randy Pacheco, the general manager of APlus Well Servicing, agreed with Dugan that the oil field will recover.

“The oil and gas industry is in a rebalancing period, so markets are shifting,” Pacheco Pacheco said. “I think the

Diversifying the economy It is also important that areas that depend on oil and gas for revenues need to look hard and long at diversifying their economy, Pacheco said.

“The oil and gas industry is the energy industry, so energy production portfolio diversification is the key to success,” he said. “Energy companies are great at developing energy, so all forms of energy should be on the table.”

SUMMER 2017 • www.basinresourcesusa.com

Keep people who know the industry Tom Dugan and Dugan Productions also believe that keeping good people who know the business is critical to the success of any business, but particularly the oil and gas industry.

With no layoffs in the past or in the future for Dugan Production, Dugan said most of his 165 employees have been with the company for a long time.

“We don’t overstaff (at Dugan Production),” Dugan said. “We have good people and I sure as hell don’t want to lay people off. We’ve been able to make it work.

We’ve been able to employ excellent people and we work together really well.”

At 91, Dugan still works six days a week. “I don’t get to work very early,” he said with a sly smile. “I usually get in (to the office) between 8 and 8:30 every morning. And, depending on the day, I’m usually here until 6.”

With no plans to retire, Dugan enjoys sharing his knowledge – and his love of the industry – with others.

“This is a good business to be in,” he said. “I like it and it’s all I know. I enjoy trying to figure out old crummy wells and I’m pretty good at it.”

With other longtime legends in the local oil and gas industry (Tom Dugan said he’s not about to “sit home and watch ‘daytime TV’”), looking to retire and pass the torch, Randy Pacheco said

24 BASIN RESOURCES those legends will be missed, but the industry will continue to thrive and grow.

“I think the next greatest thing coming to the oil and gas industry will be the next generation,” Pacheco said.

“They will bring technology, team collaboration, and social issues to the industry.”

“It will be interesting to see how energy is developed and defined in the future.”

New players There is no crystal ball to predict the future of oil and gas in the San Juan Basin but there have been signs of an increase in production and interest of late.

A new player: Denver-based DJR Energy LLC, a newly formed exploration and production company focused on developing oil and gas resources has entered the San Juan Basin market.

The company announced it is being funded by Trilantic Capital Management L.P. and Waveland Energy Partners for an undisclosed amount. It will be led by CEO David H. Lehman, a geologist and entrepreneur with over 40 years of experience in the oil and gas industry.

“We are excited to team up with two experienced oil and gas financial partners and build a highly profitable business in the San Juan Basin," Lehman said in a statement.

Glenn Jacobson, a partner at Trilantic, said in a statement the San Juan Basin is at "an attractive stage of its development."

Let’s not forget Hilcorp Carla J. Sonntag, the president and founder of the New Mexico Business Coalition, told Albuquerque Business First in April she sees the ConocoPhillips sale, as well as BP’s acquisition two years ago of all of Devon’s assets in the basin as a positive sign for the region.

“The new owner coming in is excited to be there,” Sonntag said of Hilcorp Energy, who purchased ConocoPhillips' assets in the San Juan Basin. “That will translate into more activity up there. They would not have bought those assets if they didn't have plans to drill and explore. When something is moving, it shows interest.

In an earlier issue of Basin Resources WPX said it is planning to invest up to $170 million locally this year to run a rig, drill about 40 wells and build new infrastructure.

In an article in the Albuquerque Business Journal Robert McEntyre, who recently took over the role of communications director for the New Mexico Oil and Gas Association said oil and gas provided nearly $1.6 billion in taxes, royalties and other revenues to the state general fund for fiscal year 2016, and accounted for more than 100,000 New

Mexico jobs.

He said companies operating in New Mexico produced 146 million barrels of oil and 1.3 trillion cubic feet of natural gas in 2016. “In New Mexico, we look to data provided from the state land office as well as The Energy, Minerals and Natural Resources Department and The Oil Conservation Division. We also look at what oil and gas is doing in our communities, and in hubs like Farmington, Artesia and Roswell. We got great news recently, that was broken at the national level, that Exxon (XOM:NYSE) invested $5.6 billion dollars in New Mexico.

He added that there is a great opportunity for the industry to continue to grow and thrive in New Mexico. We see people really investing in our resources here.

That’s a positive sign for our future prospects. The industry has been incredibly strong through this period of the past couple of years while bouncing back from historically low prices.

Riding the wave While the rig count in the area has risen from 0 at the first of the year to 6 in May, and new companies are entering the market, many producers remain cautious about saying the bust is over.

They know that while things are trending upward that trend could change in an instant.

www.basinresourcesusa.com • SUMMER 2071

BASIN RESOURCES 25

As finding costs remain near historical average:

Oil companies’ proved reserves decline for second year in a row Information in the 2016 annual reports of 68 publicly traded oil companies indicates that their aggregate proved reserves declined in 2016 for the second consecutive year. In addition, reported finding costs – which are exploration and development expenditures per barrel of proved reserves added – remain near their historical average. The decline in proved reserves was heavily concentrated in a few companies that wrote down Canadian oil sands projects. However, low extensions and discoveries also contributed to fewer proved reserves additions.

Together, the downward revisions, the amount of oil produced (withdrawn), and the lower extensions and discoveries led to a net decline in reserves.

For the companies included in this analysis, global crude oil and other liquids production averaged 24 million barrels per day (b/d) during 2016. These 68 companies are those oil and natural gas companies that are listed on U.S. stock exchanges, and are required to report their proved reserves every year to the U.S. Securities and Exchange Commission (SEC). Proved reserves are defined as estimated quantities of oil and natural gas that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions. Price changes can have a significant effect on the economic viability of oil projects, and some companies specifically cited low prices in 2016 as a reason to revise their proved reserves base downward.

Three companies contributed the most to the group’s combined downward revisions of 6.7 billion barrels. Each made downward reserves revisions associated with Canadian oil sands and bitumen projects totaling 1.1 billion barrels, 3.7 billion barrels, and 2.7 billion barrels, respectively. Collectively, Canadian oil sands revisions represented the largest reduction in proved reserves among companies whose 2016 reports were reviewed for any region, globally (Figure 1).

While revisions can add or subtract from proved reserves, extensions and discoveries represent newly found quantities of oil, increasing a company’s proven reserves base. Following the crude oil price decline beginning in mid-2014, companies significantly reduced capital expenditures. The largest spending reductions by many companies whose reports were reviewed SUMMER 2017 • www.basinresourcesusa.com

were in their exploration and development budgets, which likely contributed to lower amounts of proven liquids reserves additions in 2016. Excluding revisions and net purchases of proven reserves from other companies, reserves additions totaled 4.9 billion barrels in 2016. These additions were offset, however, by the large negative revisions and the amount of oil the companies produced, bringing their aggregate net change in proven reserves to a decline of 8.2 billion barrels (Figure 2).

Later this year, EIA will issue an annual report that focuses exclusively on proven reserves located in the United States, including all U.S. producers, whether or not they are publicly

26 BASIN RESOURCES

traded. The U.S. reserves component of total reserves for the 68 companies whose reports were reviewed here suggests that EIA’s proven reserves report for 2016 will show only modest changes from the 2015 report.

As these companies reduced spending on exploration and development, they focused on extracting additional oil from reserves largely developed in previous years. By directing capital to developed reserves, companies maintained production levels to maximize cash flow, focusing on the most productive and reliable acreage. This approach, together with reductions in costs resulted in lifting costs of $11.24 per barrel of oil equivalent (boe) in 2016, 36 percent below the 2011 to 2015 average.

The 68 companies spent $247 billion on exploration, development, and unproved reserves acquisitions in 2016, 37 percent below their 2011 to 2015 average of $390 billion. In addition to the 4.9 billion barrels in proved liquids reserves these companies added in 2016, they added 4.2 billion boe in proven natural gas reserves, bringing the total volume of energy reserves added to 9.1 billion boe, 35 percent below their 2011 to 2015 average.

Unlike the lower costs they realized from producing developed reserves (lifting costs), companies spent almost the same amount per boe to add reserves to their future production base, as the finding cost was $27.07/boe in 2016, only 4 percent below the 2011 to 2015 average (Figure 3).

So far in 2017, capital expenditures remain lower than for the same period in 2016. Although the U.S. onshore-focused companies in this group increased year-over-year capital expenditures in the fourth quarter of 2016 and first quarter of 2017, larger companies with international operations continued to reduce capital expenditures. Two-thirds of the companies in this group produced less than 250,000 b/d in the first quarter of 2017, with about 60 percent of these smaller producers increasing their capital expen-

ditures compared with the first quarter of 2016 (Figure 4). In contrast, almost 80 percent of the group’s larger producers in this set reduced capital expenditures.

For additional oil company financial analysis, see EIA’s Financial Review 2016.

U.S. average regular gasoline and diesel retail prices climb The U.S. average regular gasoline retail price rose one cent from the previous week to $2.41 per gallon on May 29, up 7 cents from the same time last year. The Rocky Mountain price increased four cents to $2.42 per gallon, the West Coast price increased three cents to $2.96 per gallon, the East Coast price increased over one cent to $2.34 per gallon, and the Gulf Coast price increased less than one cent to $2.16 per gallon. The Midwest price fell over one cent to $2.30 per gallon.

The U.S. average diesel fuel price rose three cents to $2.57 per gallon on May 29, 19 cents higher than a year ago. The Midwest and Gulf Coast prices each increased four cents to $2.51 per gallon and $2.42 per gallon, respectively, while the Rocky Mountain price increased three cents to $2.66 per gallon, the East Coast price increased two cents to $2.61 per gallon, and the West Coast price increased over one cent to $2.84 per gallon.

Propane inventories gain U.S. propane stocks increased by 3.4 million barrels last week to 47.1 million barrels as of May 26, 2017, 28.2 million barrels (37.5 percent) lower than a year ago. Gulf Coast, Midwest, East Coast, and Rocky Mountain/West Coast inventories increased by 1.7 million barrels, 1.0 million barrels, 0.5 million barrels, and 0.2 million barrels, respectively. Propylene non-fuel-use inventories represented 6.4 percent of total propane inventories. www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 27

Despite a significant Decline in coal use

U.S. energy consumption rose slightly in 2016 Primary energy consumption in the United States in 2016 totaled 97.4 quadrillion British thermal units (Btu), a slight increase from the 2015 level. Coal consumption decreased by 9 percent, nearly offsetting increases in the consumption of renewables, petroleum, natural gas, and nuclear fuel.

Fossil fuels continue to account for the bulk of U.S. energy consumption, and the consumption of petroleum and natural gas both increased in 2016. However, those increases were more than offset by lower coal consumption. Overall, fossil fuels made up 81 percent of the United Statesâ&#x20AC;&#x2122; total energy consumption in 2016, slightly lower than 2015 levels, but down from 86

percent in 2005.

Petroleum consumption increased to 19.6 million barrels per day in 2016, led

SUMMER 2017 â&#x20AC;˘ www.basinresourcesusa.com

by increases in the transportation sector.

Natural gas consumption increased to 27.5 trillion cubic feet, led by higher demand in

28 BASIN RESOURCES the electric power and industrial sectors. Natural gas consumption in the residential and commercial buildings sectors fell slightly, reflecting lower heating demand. Coal consumption fell to 730 million short tons in 2016, the third consecutive year of declining coal consumption. Coal consumption decreased in the electric power sector by 61 million short tons (8 percent), while industrial sector coal consumption fell by 6 million short tons (11 percent).

Nuclear fuel consumption in the United States increased 1 percent in 2016. The number of total operable nuclear generating units briefly increased from 99 to 100 when Watts Bar Unit 2 in Tennessee came online. Later in the year, the retirement of Nebraskaâ&#x20AC;&#x2122;s Fort Calhoun nuclear facility brought the number of nuclear units in the United States back to 99. Year-end 2016 nuclear capacity was slightly higher than in 2015 (99.3 gigawatts versus 98.7 gigawatts), and annual average nuclear capacity factors, which reflect the use of power plants, were also slightly higher, at 92.5 percent versus 92.3 percent in 2015.

Renewable fuels had the largest increase in energy consumption in 2016. Wind generation increased by nearly 20 percent, making up almost half of all renewable consumption increases. Solar consumption also significantly increased, as considerable electric generating capacity was added for both wind and solar resources in 2016. Hydroelectric consumption increased by 7 percent as the West Coast recovered from severe drought conditions. Together,

wind, hydro, and solar made up 91 percent of renewable consumption increases. Biomass consumption, which accounted for 47 percent of all renewable consumption in 2016, remained close to its 2015 level.

Changes in energy Consumption Fuel economy improvements are projected to reduce future gasoline use Anticipated changes in energy consumption by light-duty vehicles in the United States are based on two factors: the amount of travel and the fuel economy of the vehicles used. The Annual Energy Outlook 2017 (AEO2017) Reference case projects a decline in lightduty vehicle energy use between 2018 and 2040 as improvements in fuel economy more than offset increases in light-duty vehicle miles.

The number of vehicle-miles traveled in the United States by light-duty vehicles set a record at 2.84 trillion miles in 2016. As the number of miles driven per vehicle has remained relatively steady at about 12,000 miles per vehicle, the recent increase in vehicle-miles traveled is more attributable to an increase in the number of vehicles in use. Light-duty vehicle-miles traveled per year are expected to continue to increase, ultimately reaching 3.33 trillion miles traveled in 2040.

The fuel economy of the light-duty vehicle stock is also expected to increase because of market developments and increases in fuel economy standards for new vehicles. Although sales of new vehicles make up a relatively small portion of the total light-duty vehicle fleet in any year, and existing vehicles can remain on the road for many

years, fuel economy standards for new vehicles and the mix of vehicles purchased have long-term implications for fuel consumption.

Light-duty vehicles are generally divided into two categories: passenger cars and light trucks. Fuel economy and greenhouse gas (GHG) standards are set for the two categories by the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA). The standards applied by NHTSA and EPA are more stringent for passenger cars than for light trucks, and they are determined based on the vehicle footprint, or the area of the rectangle defined by the points of contact between the four www.basinresourcesusa.com â&#x20AC;˘ SUMMER 2017

BASIN RESOURCES 29 wheels and the ground.

For model year 2015, the required fuel economy standards averaged about 35 miles per gallon (mpg) for passenger cars and about 27 mpg for light trucks after taking into account the footprint mix of vehicles sold within each category. The standards for each category are currently required to increase over time so that the standards for model year 2025 vehicles are expected to reach about 53 mpg and 38 mpg, respectively.

Because compliance fuel economy is based on a specific test procedure that applies certain credits, compliance fuel economy generally exceeds on-road fuel economy. On-road fuel economy is more relevant for estimating and forecasting energy consumption because it reflects how the vehicle is actually used. For model year 2015, new vehicle on-road fuel economies averaged about 31 mpg for passenger cars

and about 21 mpg for light trucks.

EIAâ&#x20AC;&#x2122;s AEO2017 projections reflect both the changes in the vehicle sales mix and the fuel economy standards that are applied separately to new passenger cars and light trucks. Despite an increasing share of vehicles classified as light trucks, the AEO2017 Reference case projects improved fuel economy of new light-duty vehicles and the inuse vehicle fleet through 2025 and beyond.

Based on the more stringent fuel economy standards covering model years through 2025 that have already been established, new on-road vehicle fuel economy for passenger cars is projected to increase 43 percent between 2015 and 2025, from 31 mpg in 2015 to 45 mpg.

New on-road light truck fuel economy is projected to increase 46 percent over the same period, from 21 mpg to 31 mpg.

Fuel economy of the overall vehicle stock rises more slowly, given the slower

SUMMER 2017 â&#x20AC;˘ www.basinresourcesusa.com

turnover of light-duty vehicles.

Because light trucks are projected to make up a growing share of the total lightduty vehicle fleet, the weighted-average fuel economy is expected to be closer to that of light trucks. In the AEO2017 Reference case, on-road fuel economy of new lightduty vehicles increases from about 25 mpg in 2015 to 36 mpg in 2025.

The net effect of these fuel economy trends is that light-duty vehicle energy consumption is projected to decrease 12 percent, from 16.1 quadrillion British thermal units (Btu) in 2017 to 14.2 quadrillion Btu in 2025 in the AEO2017 Reference case, despite projected 5 percent growth in vehicle-miles traveled over the same period.

Nearly all of this energy consumption is gasoline, with gasoline consumption by light-duty vehicles projected to fall from 8.7 million barrels per day in 2017 to 7.5 million barrels per day in 2025.

30 BASIN RESOURCES

up 72 percent

Utility-scale solar has grown rapidly over the past 5 years Utility-scale solar installations – including both photovoltaic (PV) and thermal technologies – grew at an average rate of 72 percent per year between 2010 and 2016, faster than any other generating technologies. Utility-scale solar plants – with a capacity of at least one megawatt – now make up about 2 percent of all utilityscale electric generating capacity and 0.9 percent of utility-scale generation. The first utility-scale solar plants were installed in the mid-1980s, but more than half of the currently operating utility-scale solar capacity came online in the past two years.

As of December 2016, more than 21.5 gigawatts (GW) of utility-scale solar generating capacity was in operation across the United States, with more than 7.6 GW of that capacity coming online in 2016. Although California has the highest total installed capacity of any state, a number of states have deployed significant utility-scale solar capacity in recent years. Several states have policies such as renewable portfolio standards or state renewable tax credits to encourage solar deployment. Since 2005, the federal government has provided a 30 percent investment tax credit, which is scheduled to phase down or expire by 2022.

Utility-scale solar generation has been increasing as a result of the rapid growth in capacity; however, the solar share of utility-scale electricity generation is 0.9 percent, about half of its share of capacity.

Most solar generators are considered an intermittent or non-dispatchable resource because their availability depends on ambient insulation (exposure to the sun).

Some systems, such as the Crescent

Dunes solar thermal plant, are paired with an energy storage system, which allows greater operational flexibility. As monthly capacity factors indicate, solar generation is strongly seasonal, with more sunlight available in the summer (about 30 percent capacity factor on average) than in the winter months (near 15 percent).

In addition to utility-scale solar, electric generating capacity from small-scale solar systems (such as rooftop and other customer-sited PV systems) has also grown. In 2016, EIA estimates that the United States added 3.4 GW of smallscale solar generating capacity across all

three end-use sectors (residential, commercial, and industrial), ending the year with more than 13.1 GW of installed capacity. (EIA reports capacity values in GW of alternating current output.)

According to EIA estimates, California, New Jersey, and Massachusetts had the most small-scale solar capacity with 5.4 GW, 1.3 GW, and 1.0 GW, respectively.

Monthly generation from small-scale solar capacity is estimated to have been 1.6 million megawatt hours (MWh) on average in 2016, or about two-thirds of the amount generated by utility-scale solar generators.

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 31

Profits down

OPEC net oil revenues in 2016 were the lowest since 2004 Members of the Organization of the Petroleum Exporting Countries (OPEC) earned about $433 billion in net oil export revenues in 2016, the lowest since 2004. In real dollar terms, the 2016 revenue represents a 15 percent decline from the $509 billion earned in 2015 – mainly because of the fall in average annual crude oil prices and, to a lesser extent, because of decreases in OPEC net oil exports.

EIA projects that OPEC net oil export revenues will rise to about $539 billion dollars (nominal) in 2017, based on the forecast of global oil prices and OPEC production levels in EIA’s May 2017 Short-Term Energy Outlook (STEO). The expected increase in OPEC’s net export

earnings is attributed to slightly higher forecast annual crude oil prices in 2017 as well as slightly higher OPEC output during the year.

For 2018, OPEC net oil export revenues are forecast to be $595 billion (nominal), with an increase in forecast crude oil prices and higher OPEC production and exports contributing to the rise in overall earnings.

Saudi Arabia has consistently earned more oil export revenues than any other member of OPEC, with its share in total OPEC net oil export revenues ranging between 29 percent and 34 percent since 1996. Iran’s revenue share has fluctuated, with a significant reduction evident over the 2012 to2015 period mainly as a re-

SUMMER 2017 • www.basinresourcesusa.com

sult of the imposition of nuclear-related sanctions by the United States and the European Union that targeted Iran’s oil exports. These sanctions resulted in roughly 800,000 barrels per day of Iranian production being shut in between January 2012 and December 2015. Iran was the only OPEC member country whose net oil revenues increased in 2016, when its share of total OPEC net oil export revenues increased to 8 percent.

Libya’s share of total OPEC oil export revenues has fluctuated since 2010 as the disruption of the country’s oil sector during the civil war, overthrowing the

* OPEC 32

32 BASIN RESOURCES

OPEC

continued from 31

Gadhafi regime, and more recently, as warring factions in the country have repeatedly targeted oil sector installations.

Iraq, however, has seen a substantial increase in oil output since 2010, with its revenues accounting for 12 percent of the OPEC total in 2016. During the early 1990s, Iraq’s revenues had fallen to less than 1 percent of OPEC’s total as Iraqi oil production was largely shut in following its August 1990 invasion of Kuwait and the subsequent United Nations oil embargo that lasted until May 2003.

Iraqi oil export revenues increased after 1996 under the United Nations’ oil-forfood program, which permitted revenue from Iraqi oil exports to purchase only food and medicine for war reparations and for other specific authorized purposes.

Column

continued from 16

Council (GPEC) decided Arizona needed a part of that new business rush. The GPEC made a decision to fly 100 chief executive officers from California based businesses to Arizona to tour the state’s attractions, to visit with state leaders and to share with those CEOs all that Arizona has to offer.

Lower taxes, a great quality of life, and a positive economic development atmosphere in the Grand Canyon State were emphasized to the CEOs. That’s what we need to do here in San Juan County. We need to send our own ambassadors – those who know our communities, our economic strengths, our amazing quality of life – and who are enthusiastic about our area – to share with other presidents and chief executive officers all that is wonderful about San Juan County.

The E>P group of community leaders

recognized the need to provide a positive business environment, a good workforce, and the need for economic development in San Juan County. E>P eventually became Four Corners Economic Development, which actively seeks economic development in San Juan County. We need to invite those leaders and look at other great leaders – who love our community the way we do – to find businesses that will help our economy, be good community partners, provide jobs, and, just as importantly, care as much as we do about the economic future of our area.

We need to invest in our local and talented leaders who will help guide our economic future for the generations that will follow us. It is the least we can do for our children and our grandchildren, and it is the BEST we can do for them.

www.basinresourcesusa.com • SUMMER 2017

BASIN RESOURCES 33

Tribal Government

continued from 9

Navajo. The classes would be of interest to companies and regulators working on American Indian lands, Wickman said.

They will provide information on how to deal with regulators and the government agencies on tribal lands. There also will be a focus on the history of those lands and business, as well as the logistics of operating a business or utility on tribally owned lands.

The first seminar: TEMS-110 is an introduction to federal Indian policy and, according to the SJC catalogue, “[I]t presents an overview of the history of federal Indian policy covering eight separate time periods. Students will better understand the evolving relationship between the U.S. government and the Indian tribes within its borders illuminating the impact that past policies and treaties have on current protocols,” the catalogue description stated.

The second seminar: TEMS-210 is an introduction to tribal governance, sovereignty and regulations, which “will cover the impact of the “Federal Indian Policy” on tribal sovereignty and governance, as well as regulatory topics legislated and enforced at a federal, state, and tribal level,” the catalogue stated.

This seminar also will provide a look at the permitting processes, drilling plan requirements, zoning restrictions, and other

“There will be a series of field trips to visit with Native Americans in this area. They will interact with students and let them hear about energy development on their lands.”

— Barbara Wickman SJC School of Energy Director

rules and regulations developed by tribal governments to protecting tribal resources and their use in the best interest of the tribe.

The third seminar: TEMS-211 is an introduction for Indian energy, water, land and minerals. It will give an overview of tribal resources and provide students with a look at the locations of tribal energy resources and existing infrastructure. Other areas of discussion will include tribal ownership rights and management of resources.

“Guest speakers will convey real-life knowledge and experiences throughout the seminar,” the catalogue stated.

The fourth seminar: TEMS-212 is an introduction to tribal business, finance and human resources. It will offer students a basic understanding of “the forms of busi-

SUMMER 2017 • www.basinresourcesusa.com

ness ownership and the language of business and managerial accounting on tribal and non-tribal lands,” the catalogue stated.

Instructors will use actual case studies to give students a real-life perspective of the challenges of doing business on tribal lands. Topics emphasized include “ethical and social responsibility and specific issues experienced in energy development in tribal communities.”

The fifth seminar: TEMS-213 covers a practical approach of doing business on tribal lands, including such topics as cultural influences and respecting tribal leadership. Students will have an opportunity to meet with tribal leaders from the four local tribes and learn about what is necessary “to organize, submit, and fulfill an energy project on tribal lands,” according to the catalogue.

“There will be a series of field trips to visit with Native Americans in this area,” Wickman said. “They will interact with students and let them hear about energy development on their lands.”

An American Indian consulting company assisted the School of Energy in development of the curriculum for the seminars, and the curriculum includes a number of guest speakers from the different tribes operating in this region.

“It’s going to be a real interesting program,” Wickman said.

34 BasiN resoUrces

ConocoPhillips continued from 7

Hilcorp

Hilcorp charitable giving

This was a five-year bonus program that provided employees with a $50,000 voucher to spend on their dream car. The new bonus program, “Dream 2015,” promised each employee $100,000, if the company doubled in size – and it did.

Hilcorp continues to plan “amazing bonus programs,” according to a press release from the company.

Great communication

Welcomes new ideas from staff In addition to the financial benefits, Hilcorp employees say they enjoy being able to express ideas freely and communicate with upper management. “When you suggest an idea to upper management, they really listen to you and most of the time they will go along with the idea you suggested. I never had that before with

Hilcorp’s website states that the company has simple, clear and easily communicated core values, which include integrity, doing the right thing; recognizing urgency by acting today and not tomorrow; having ownership in the company and working like you own it; having alignment, because when Hilcorp wins, all employees win; and having innovation by getting better every day.

Hilcorp promotes charitable giving by its employees and partners with non-profits in the communities where it operates.

“We take great pride in our accomplishments and strive to maintain a culture that will allow for continued growth,” the site stated.

Hilcorp also had a strong focus on energy independence and, should the company remain active in the San Juan Basin, it could see sales of natural gas to such entities as PNM, which plans to abandon coal by 2031. PNM, however, previously stated it would operate a natural gas plant in the region and increase its use of natural gas from 6 percent to 23 percent, according to its draft resource management plan.

continued from 7

any other company,” another surveyed employee said.

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Farmington Fire Equipment ............17 6007 E. Main • Farmington, NM 505-327-1933 160 Rock Point Dr, Suite C • Durango, CO 970-247-2141 www.f-fire.com

BM Technology & Supply ................32 2303 Bloomfield Hwy. Farmington, NM 505-326-9144

Four Corners Community Bank ........33 505-327-3222 New Mexico 970-565-2779 Colorado www.TheBankForMe.com

Calder Services ................................7 #7 RD 5859 Farmington, NM 505-325-8771

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Edward Jones/Kristy Visconti ..........19 4801 N Butler, Suite 7101 Farmington, NM 505-326-7200 www.edwardjones.com

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Kelley Oilfield Services...................36 3601 N. 1st Suite M 505-632-2423 Bloomfield, NM www.kosinm.com

Reliance Medical Group ..................24 3451 N. Butler Ave. Farmington, NM 505-324-1255 www.reliancemedicalgroup.com

Kozi Homes ...................................21 Farmington, NM 505-327-9008 www.KoziHomes.com

Rush Truck Centers .........................3 6521 Hanover Road N.W. Albuquerque, NM 505-839-3600, 800-357-6643 www.rushtruckcenters.com

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www.basinresourcesusa.com • sUMMer 2017

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