PBE Magazine April 2015

FREE

VOLUME 3 NO. 4

The Power of

APRIL 2015

TEXAS

SILVER LINING:

XCOR'S FINAL DESTINATION IN SIGHT

BUSINESS OPPORTUNITY IN THE BUST 8

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PBE CARES

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SHARE IS TURNING 10!

• U.S. RIG COUNT • TOP 35 Drillers & Operators

Industry Data

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News

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Events

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www.PBEMag.com |

Auctions

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Calendar

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RESTAURANT BITES

Travel

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Tips

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Energy

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Tech

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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APRIL 2015

CONTENTS

PBE FEATURES 8

Silver Lining: Business Opportunity in The Bust

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12 XCOR's Final Destination, In Sight

OTHER EDITORIALS

15 Calendar of Events 18 Conferences in April - May 19 Upcoming Auctions 20 Advice for Mineral Owners from Permian Basin Land Girl 22 Festivals and Events in Texas 25 Safety Tips - Three Things to Know for Current and

New Businessowners 26 PBE Cares - SHARE is Turning 10!

28 Tech Bites - Sony Launches PlayStation Vue as Bigger,

Pricier Internet TV 30 PBE News Briefs:

Basin, Shale, State, Government, Nation, Offshore & World 38 Restaurant Bites - Tacos OJ 40 PBE Inspires - Waking Jesus 42 By The Numbers: Texas Rig Count, Top Drillers, Top Operators 45 This Month in Petroleum

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

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LETTER FROM

THE EDITOR The secret of business is to know something that nobody else knows.

- Aristotle Onassis If Aristotle was still around today, observing the culture of West Texas and our reaction to recent events, he would probably say we have proved the meaning of this insight he shared many decades ago. It’s amazing to see how resourceful our community is when they are put to the test in times of struggle.

That’s a lot of what you’ll read about in this issue of PBE: people who see opportunity in the middle of the storm and a chance to take a risk when others are playing it safe. You’ll hear about a couple local business owners who decided to branch out on their own right in the midst of the uncertain climate we’re currently in because they seem to know something that others don’t.

They share the secret to their confidence and results of the leap of faith they’ve taken.

You’ll also get an update on one of the many unique offerings in our West Texas community through the completion of Xcor’s new spaceport at Midland International Airport. In this month’s safety tips, the experts at American Safety also give you an overview of things to look out for as you’re using or starting a new company to make sure you getting or receiving the high quality our community is known for.

Along with the updates from around our state, nation and world, make sure you also take time to be inspired by Pastor Daniel Stephens and learn about a wonderful local non-profit celebrating an important milestone of success.

Since no one really knows how long these lower than desired oil prices are going to last, why not try to make the best of a rough time and look for as much untapped and unknown opportunity as possible.

/PBENERGYMAG

Carlos Madrid Editor in Chief/Publisher sales@pbemag.com

@PBENERGY

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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EDITORIAL CONTRIBUTORS

PBE MAGAZINE CONTACTS VOLUME 3 NO. 4

EDITOR IN CHIEF/PUBLISHER Carlos Madrid sales@pbemag.com 432. 559. 5886 ART DIRECTOR/LAYOUT & GRAPHICS Luke Pawliszyn Lukasz Design Studio West Hollywood, CA luke@lukaszdesign.com

TARYN SNIDER FREELANCE WRITER tarynsnider@gmail.com

ADVERTISING For advertising info call 432. 559. 5886 or email sales@pbemag.com ACCOUNT EXECUTIVE Dominique Brown dominique@pbemag.com 432. 599. 3127 SUBMISSIONS Submit story ideas & other news to marcy@pbemag.com

DANIEL STEPHENS SENIOR PASTOR Mid-Cities Community Church • Midland, TX daniel.stephens@midcities.org

PUBLISHED BY: PBE Magazine, LLC. Permian Basin Energy Magazine 4500 Erie Drive Midland, TX 79703 Main Phone: 432. 559. 5886

AARON CAMPBEL American Safety Services, Inc.

www.PBEMag.com

/PBENERGYMAG

@PBENERGY

Copyright © 2015 Permian Basin Energy, Inc. • Mad Ads Media All rights reserved.

Reproduction in whole or in part without the written permission of PBE MAGAZINE, LLC is strictly forbidden. The greatest care has been taken to ensure the accuracy of information in this magazine at time of going to press, but we accept no responsibility for omissions or errors. PBE Magazine welcomes any comments, feedback, suggestions, and/or submissions for consideration for publication. These may be submitted to: sales@pbemag.com.

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KIMBERLY SMITH CEO Development Resources, Inc.

The Power of

TEXAS

www.PBEMag.com

To Advertise call

(432) 559 - 5886 or email

sales@pbemag.com

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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SILVER LINING:

Business Opportunity In The Bust

by Taryn Snider

There’s a saying that the more things change, the more they stay the same. That couldn’t be truer for West Texans. The volatility of the oil market is a perpetual roller coaster for us and whether we’re booming up or busting down, the tracks always seem to be steeper for us than everyone else. We’re all familiar with how the machine works: it goes up, it comes down, it goes up again. But each ride is different and the same goes for each economic cycle.

Many are saying that this is the most difficult part, looking for the bottom. Are we there yet? Will it go below $40? We never thought it would get below $60 but it did. That was when we knew we were heading into a recession. With the Permian Basin in defensive strategy mode we’ve seen a lot of acting and reacting to the downturn. Clearly, the drilling industry knows how to act swiftly when the price of oil isn’t right. But if you look past the chaos, the depression, and the fear of the unknown you’ll find that there are quite a few west Texans who are riding this ride with their hands in the air and turning a scary situation into an opportunity.

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Andrea Wilson knew for a while that her position at her old job wasn’t going to lead to any new opportunities so she left in the midst of the bust and started Flintlock Services LLC. Equipped with past marketing experience and a long list of connections she noticed that there were businesses out there missing out on marketing opportunities because they lacked the manpower. That’s where she comes in. Wilson says, “I’m a full time sales person that they don’t have to pay – unless I sell.” She definitely thinks the bust has worked in her favor. “Now’s the time to take advantage of marketing because prices are going to have to come down and right now is when

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

people have the time to meet with you. They might not have a rig running but they’ll sit and talk to you for a few hours because they have nothing else to do. But when things do get busy, they’ll remember you.” But she’s not spending all her time building relationships.

She’s finding herself turning work away, even during the downturn, in an effort to keep the quality of her work optimal. The majority of her day is spent dropping in on customers and they’re always happy to see her because she usually brings goodies with her. That’s how she stays profitable because, “If I’m sitting in the office I’m not making any money.”

For Matt Hood starting up during a downturn was a strategic move. “The best time to invest is when others are scared. I have lived through the ebbs and flows of the oil & gas markets for my entire life as a son of the Permian Basin and I am confident in better days ahead. While many are running scared, I see it as a tremendous investment opportunity in our future.

Starting out during a downturn has done three things for H&J Petroleum. It has allowed us the time to place the foundation of our company and create a common vision between partners; it allows us to recruit some of the best talent in the industry, which will allow us to be poised for success when the oil & gas markets rebound.

I really believe the timing could not be better and we are prepared make the right financial decisions to succeed until then.” Matt Hood alongside Nick Hood, his father, and coworker Michael Johnson started H&J Petroleum Management and Consulting in January of 2015. H&J Petroleum Management and Consulting provides lower and mid-management roles on a work site and manages projects from start to finish. With Nick’s work history in the drilling industry dating back to 1981, Matt consulting since 2006 and Michael being a recent grad of Texas A&M University, the combined experience and qualifications are undeniable. But their faith is what leads them and their core values, followed by safety, integrity, education and excellence. Staying true to their Christian beliefs and bringing others to the Lord through their business are what they consider true measures of their success. With that said, achieving financial success doesn’t fall far behind their spiritual goals. Independence

was always a long term objective but with the boom it just came sooner than expected and they all agree it was worth it. Michael Johnson said, “Waking up in the morning and coming to work at a company with your name on it is a totally different feeling.”

An area in the industry that the founders of H&J Petroleum feel can be lacking in the oil and gas industry is education. A way for them to sincerely stand by their commitment to education is to offer an education and training program to their contractors free of charge.

What better way to achieve excellence than to increase the skills of your contractors by taking matters into your own hands?

Another local employee turned entrepreneur is Greg Moore of Basin Design Service LLC. Like H&J Petroleum, Moore credits his success to his faith. When asked, “Who would start a business at $45 a barrel?” His response was, “God would!” Unlike the other companies, going independent wasn’t a deliberate move. It took over six months to obtain the Master Service Agreement required to provide his services to the major oil company he works with. As an electrical designer, 90 to 95 percent of his job is done in the office working with engineers. They service tank batteries, salt-water disposals, compressor stations, gas plants, basically anything electrical. The bust has also worked in Moore’s advantage because with everyone less busy, help is easier to find and equipment is a little cheaper. But like the rest of us he’s looking forward to things picking back up again.

For now he says he’s going to “trust in the Lord to keep it going the right way and try to be smart enough to ride out the bust so we can enjoy it when it’s booming again.”

The oil industry is no stranger to innovation and entrepreneurship; we’re always striving for efficiency and while we’re used to seeing new businesses coming out of the woodwork during the busy times, the reasons for starting up during a recession are even more advantageous. When asked about his timing to go out on his own, Matt Hood quoted 18thcentury British nobleman Rothschild, “The time to buy is when there is blood in the streets.” The Permian Basin is bleeding right now so it must be time to buy.

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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HAPPY EASTER! from the PBE Mag. Family

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

WTxEC Annual Conference 2015

Power In Partnership MAY 6-7 TH 2015

San Angelo, Texas The West Texas Energy Consortium is excited to present our 2nd Annual Conference at the McNease Convention Center on May 6 & 7, 2015 Visit wtxec.org for the full agenda

Day One (May 6, 2015) Workshop & Training Sessions • Emergency Responders Training Wild Well Control 6 hours CEU offered • Texas Regional STEM Education with Dr. Reagan Flowers • Economic Development “Share The Knowledge” Railway expansion, city ordinance, hydraulic fracking, and more

Members Only Event - TBA Networking Reception Day Two (May 7, 2015) Industry Trends, Employer Updates, Legislative Affairs, Economic Forecast, and MORE!

INTERESTED IN SPONSORSHIP? WTxEC has something for everybody. To learn more about supporting our work in West Texas and the benefits to your company or organization, contact Katherine Stokes, Executive Director katherine@wtxec.org and 325-669-2769.

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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FINAL DESTINATION, IN SIGHT It’s a feat that’s been two and a half years in the making and the reality of the Tall City becoming more suitably known as Space City is closing in. XCOR Aerospace Inc. announced its intentions to move their company headquarters to Midland, TX on July 9, 2012.

by Taryn Snider

It was a deal that involved a $10 million incentive package to XCOR from the Midland Development Corporation. In return, XCOR was required to establish $4 million in capital investments by December of 2017 and to be generating $12 million in payroll over the next five years. XCOR chose to establish residence in Midland because of the clean airspace, access to technical parts and machinery already established here due to the existing oil and gas industry, well educated local workforce also due to the existing oil and gas industry, our friendly business climate and our mild weather.

XCOR’s facilities, which are being renovated and are expected to be near completion, include a 60,000 square foot hanger, office space and test site located at Spaceport Business Park, a business campus 12

situated on the southwest side within the airport. XCOR’s workforce is expected to begin occupying the building this spring but it’ll come in stages as construction progresses.

Some Midlanders have been skeptical about this project but space tourism is a real thing and with the arrival of the space industry to the Permian Basin, additional opportunities have already started to follow suit. Midland International Airport recently became Midland International Air and Space Port which essentially means that they are now a licensed commercial space launch site. This approval was promised to make Midland attractive to other commercial space companies and as expected, such companies have already started to relocate. Orbital Outfitters,

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

kilometers, which is the definition of outer space, and then return to Midland Space Port.

Flights are expected to last about an hour from beginning to end and cost just shy of $100 grand. With a waiting list of upwards of 300 customers already in line to experience space travel, Bryan Campton Director of Media and Public Relations at XCOR says, “We’re here to make space available to everyone.”

a company that develops and manufactures space suits, recently broke ground on its new facility at Spaceport Business Park. Their facility will include Midland Altitude Chamber Complex, a suit testing and evaluation chamber.

The University of Texas of the Permian Basin has also expressed interest in implementing an aerospace engineering program to accompany the potentially new local economic environment.

recently XCOR appointed Jay Gibson, formerly of BeechcraftCorporation, as their new CEO. His predecessor, Jeff Greason, was appointed as Chief Technology Officer. The transition will allow time for Jeff Greason to focus on the Lynx Program. Both Mr. Gibson and Mr. Greason have already purchased real estate in Midland and are looking forward to living here in our friendly atmosphere - when they’re not traveling outside of the Earth’s atmosphere.

Currently, XCOR’s focus is on their flight test program, Lynx, which they currently have ten engineers working on along with retired NASA astronaut, Rick Searfoss, Lynx’s chief test pilot. Flight tests are expected to start late summer or early fall and will consist of runway hops all the way to flying 120,000 feet. The next step will be space tourism in full swing.

Space passengers will leave Midland International Air and Space Port in the Lynx suborbital spacecraft and fly out to 328,000 feet or 103 APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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OBSERVANCES AND CELEBRATIONS

APRIL 2015

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5

PASSOVER

EASTER

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WORLD HEALTH DAY

Sponsored by United Nation’s World Health Organization (WHO), World Health Day focuses upon a different health theme each year. It is an international event to emphasize and work on important health issues or problems. Many countries around the world participate.

Birthstone: Diamond Flower: Sweet Pea, Daisy National: National Humor Month International Guitar Month Keep America Beautiful Month Lawn and Garden Month National Poetry Month National Pecan Month National Welding Month Stress Awareness Month

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15 TITANIC REMEMBRANCE DAY

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Titanic Remembrance Day is dedicated to the memory of the Titanic, and over 1500 people who died. On this day in 1912, the Titanic sank in the icy waters of the north Atlantic ocean.

NATIONAL GARLIC DAY

21 SHEPPERD DISTINGUISHED LECTURE: WENDY DAVIS

INCOME TAXES DUE

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AUTISM SHARE WALK

Wagner-Noel Performing Arts Center. 7-9PM. The John Ben Shepperd Public Leadership Institute is pleased to announce the topic and guest speaker for a special John Ben Shepperd Distinguished Lecture. The title is: “Educating Texas: Complex Challenges – New Perspectives.” The lecture will feature 2014 Texas Gubernatorial Democrat Nominee & Author Wendy Davis. The goal of the lecture will be to examine the state of affairs in Texas public education systems today, particularly with regard to funding. www.shepperdinstitute. com. (432) 552-2860. denny_j@utpb.edu

9AM-12PM. 801 N. Loop 250 W. Midland, TX. The 2015 Autism SHARE Walk will be held at Grande Communications Stadium beginning at 9:00am! Join us in supporting children with all special needs and their families! Tons of family fun to be had including: bouncers, dancing, resource fair, rolling video games, therapy horses, and much more!

MAY 2015 Birthstone: Emerald Flower: Lily-of-the-Valley and Hawthorne

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MOTHER’S DAY

CINCO DE MAYO

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MEMORIAL DAY

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Hurt by the Downturn?

Need to be more efficient & competitive?

Decrease your liability costs?

Increase Professional Recognition?

We can help you better survive the downturn, gain more operational control, and be more efficient. Now is an excellent time to regroup and fix the problems you found during the boom times.

We can help with: MANAGEMENT SYSTEMS, EQUIPMENT MANUFACTURE, OILFIELD SERVICES TAKE ACTION NOW www.koelling.us

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training@koelling.us

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

469-236-6612

The Power of TEXAS To Advertise call (432) 559 - 5886 or email

sales@pbemag.com

www.PBEMag.com

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CONFERENCES IN APRIL - MAY 2015 GPA Annual Convention 04/12/2015 - 04/15/2015 San Antonio TX, USA www.gpaglobal.org/calendar/events

OGIS New York, New York 04/20/2015 - 04/22/2015 New York, New York, USA www.ipaa.org/meetings-events

API Spring Refining and Equipment Standards Meeting 04/13/2015 - 04/15/2015 Seattle WA, USA www.api.org/events-and-training/calendar-ofevents/2015/springrefining

IHS Energy CERAWEEK 04/20/2015 - 04/24/2015 Houston TX, USA www.ceraweek.com/2014

AFPM Security Conference 04/13/2015 - 04/15/2015 New Orleans LA, USA www.afpm.org/conferences AFPM Security Conference 04/13/2015 - 04/15/2015 New Orleans LA, USA www.afpm.org/conferences SPE International Symposium on Oilfield Chemistry 04/13/2015 - 04/15/2015 The Woodlands TX, USA www.spe.org/events/ocs/2015 API Spring Operating Practices Symposium 04/14/2015 - 04/14/2015 Seattle WA, USA www.api.org/events-and-training/calendar-ofevents?page=2 International Symposium on Fluid Flow Measurement 04/14/2015 - 04/17/2015 Arlington VA, USA www.isffm.org

Alliance Expo and Annual Meeting 04/21/2015 - 04/22/2015 Wichita Falls TX, USA www.texasalliance.org/event/alliance-expo-annualmeeting PESA Annual Meeting 04/22/2015 - 04/25/2015 Greensboro GA, USA www.ceraweek.com/2014 AIChE Spring Meeting and Global Congress on Process Safety 04/26/2015 - 04/30/2015 Austin TX, USA www.aiche.org/conferences/aiche-spring-meetingand-global-congress-on-process-safety/2015 SPE Western Regional Meeting 04/27/2015 - 04/29/2015 Anaheim CA, USA www.spe.org/events/calendar GPA Permian Basin Annual Meeting 04/30/2015 - 04/30/2015 Midland, TX, USA (918) 493-3872 (918) 493-3875 atollette@gpaglobal.org www.gpaglobal.org Offshore Technology Conference (OTC) 05/04/2015 - 05/07/2015 Houston TX, USA www.2015.otcnet.org East Texas Energy Symposium 05/05/2015 - 05/05/2015 Kilgore, TX, USA www.easttexasoilmuseum.com AFPM National Occupational & Process Safety Conference and Exhibition 05/12/2015 - 05/13/2015 Austin TX, USA www.afpm.org/conferences

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

Leading Auctions in the Oilfield Industry.

Upcoming Auctions and Auction Equipment listings from Tradequip International’s online and site-held auction companies.

Saurce: Tradequip International

Drilling Rigs

Prod.

Equip.

Drilling Equip.

Tubular Goods

Oilfield Trucks

Oilfield Trailers

Parts & Tools

www.tradequip.com

Support Equip.

SOUTHCENTRAL AUCTIONS

COMPANY

DATES

LOCATION

INVENTORY

OILFIELD EQUIPMENT AUCTION

Kruse Energy & Equipment LLC

April 1, 2015

Fairfield, TX

No Lots are Currently Posted for this Auction

PUBLIC AUCTION

Machinery Auctioneers of Texas

April 14, 2015

Odessa, TX

OILFIELD EQUIPMENT AUCTION

Kruse Energy & Equipment LLC

April 22-23, 2015

Odessa, TX

WELL SERVICE RIGS & EQUIPMENT

Cannon Sales Inc

April 22-23, 2015

Odessa, TX

EQUIPMENT

Ritchie Bros Auctioneers (America)

April 30, 2015

Lincoln, NE

INTERNET AUCTIONS

COMPANY

DATES

LOCATION

INVENTORY

BOILER BANKRUPTCY AUCTION

Network International Inc

April 1-8, 2015

Internet

No Lots are Currently Posted for this Auction

PIPE & EQUIPMENT AUCTION

Network International Inc

April 14-22, 2015

Internet

PIPE & EQUIPMENT AUCTION

Network International Inc

April 28-May 6, 2015

Internet

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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ADVICE FOR MINERAL OWNERS FROM A PERMIAN BASIN LAND GIRL

A FEW GOOD MEN AND WOMEN What can you expect from a good land manager?

Landmanagers are often the public relations face for the oil company, mineral owners and royalty owners.

Although you may not see the rest of the team, when negotiating, we remain confident in the following areas:

Through this active professional association, we receive peer support, and support a number of charities and scholarships. In 2014, we gave $71,000.00 to local charities and scholarships.

Mineral owners probably know that leases can be assigned and that the landman you are working with may not be the land manager through the life of a lease.

Therefore, your lease negotiations are important. Within a three year lease, life happens, people change jobs, and companies change.

1) We are working with the actual mineral, royalty and surface owners 2) We trust the company or team we are representing 3) When we make you a lease offer, the company will pay the lease bonus 4) We trust the geologist who has worked hard to identify potential zones or acreage 5) The division order analyst will help credit your royalty payments fairly 6) Negotiated surface damages will be paid 7) The company will be a prudent operator and make efforts to clean up roads, surfaces, etc.

Throughout April, we are continuing to provide on-going education to mineral, royalty owners with #agentsofchangeinoil featuring smart women and amazing men who are leaders throughout the state of Texas.

Truly yours,

Prudent landmanagers follow the ethics of the American Association of Petroleum Landmen. The Permian Basin Landman’s Association has an active group of 1,400 current (active and associate) members. Some meet monthly for continuing education and networking.

Kimberly Smith, CEO Development Resources, Inc. can also help retrieve and inventory your mineral estate. @permianlandgirl on twitter or landmaam.com

Ask the Permianlandgirl on KWEL.com, AM 1070 and FM 107.1 - every Saturday at 1 PM. Call 432-620-8700 to ask questions or email me at permianlandgirl@gmail.com

Let your minerals be a joy in your life‌

Contact us to help us inventory your minerals. www.permianlandgirl.org 20

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APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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APRIL - MAY 2015

TOP

FESTIVALS AND EVENTS IN TEXAS All across Texas, a variety of festivals, events and attractions are a great way to have fun and to spend time with your family.

RUN FOR GOD - BEGINNER'S RUNNING PROGRAM NOW THROUGH April 23 First Presbyterian Church, Midland, Texas 79701. 12PM - 1PM. Ever wanted to run a 5k, but didn't know where to start or were just scared? This is the place for you. We will learn about running together and will progress through 14 weeks of instruction, culminating with the Run For Babies 5k on April 25, 2015.

26TH ANNUAL BURTON COTTON GIN FESTIVAL April 17-18 Burton-The cotton era comes alive! Gin tours, parade, auctions, live music, folklife demonstrations, tractor pull, petting zoo, contests, and more. Texas Cotton Gin Museum, 307 North Main Street.

(979) 289-3378 www.cottonginmuseum.org

WINE DOWN AT PLEASANT HILL WINERY April 3, 10, 17, 24 and May 1, 8, 15, 22, 29 Brenham - “Wine Down” on Fridays on the deck and watch the sun set.

Enjoy wine by the glass or share a bottle with friends. Cheese boards available. 3pm-sunset. Every Friday in March, April and May. Pleasant Hill Winery, 1441 Salem Road.

(979) 830-VINE (8463) www.pleasanthillwinery.com

LIVINGSTON’S TRADE DAYS April 17-19, May 15-17, June 12-14 Livingston - Pedigo Park - Open year-round on the weekend before the third Monday (closed April). Two covered pavilions and openair lots accommodate over 350 vendors: arts, crafts, collectibles, antiques, food. Hwy 59N, ¾ mile north of Hwy 190. Free admission.

(936) 327-3656 Email: tradedays@livingston.net www.cityoflivingstontx.com

UNITY THEATRE PRESENTS “SHOOTING STAR” April 9-19 Brenham-Enjoy an intimate Studio Series comedic drama about college lovers having an unexpected, life-altering reunion while snowed in for the night at an airport. Unity Theatre, 300 Church Street. Thurs 7:30pm, Fri/Sat 8pm, Sun 4pm.

(979) 830-8358 www.unitybrenham.org OFFICIAL BLUEBONNET FESTIVAL OF TEXAS April 11-12 Chappell Hill-Stroll through this historic town to enjoy the festival’s 50th Anniversary with over 400 juried vendor booths of home decor, gardening, jewelry, pet accessories, children’s items and more. Plus great food, entertainment, music & fun in the heart of bluebonnet country. Listed in Texas Highways magazine as the #7 most popular event!

1-888-BRENHAM www.chappellhillmusuem.org MAMMA MIA! April 12 Wagner Noel Performing Arts Center. 7-9PM. 1310 N. FM 1788.

Midland, TX 1 (800) 514-3849 www.wagnernoel.com 22

COME AND TASTE IT Apr. 17, May 21, Jun. 18, Jul. 16, Aug. 20, Sept 17, Oct 15, Nov 19 & Dec 17 Gruene Historic District / New Braunfels - Meet Texas’ best winemakers the third Thursday of each month. Enjoy complimentary wine and beer tastings, and learn directly from the craftsman. Live music and food samples complement the wines on Gruene Historic District’s Grapevine patio. Also live entertainment nightly at Texas’ Oldest Dancehall. 830-606-0093 www.GrapevineinGruene.com 4TH ANNUAL UNTAPPED FESTIVAL April 18 Austin-In salute to the culture of quality craft beer, 65 breweries and over 200 craft beers are featured at events held at 20-acre Carson Creek Ranch, just minutes from downtown Austin. This year’s musical stage lineup features Manchester Orchestra, Phosphorescent, Black Joe Lewis, Jean Grae, Bear Hands, In The Valley Below, Bop English and Calliope Musicals. www.untapped-festival.com FLATONIA CHAMBER OF COMMERCE CRAWFEST April 18 Flatonia-Czech us out! A feast of crawfish, shrimp, sausage, corn, potatoes, beer, wine, tea, live music, dancing. Silent & live auctions.

Door Prizes, 6pm-12 midnight. Flatonia American Legion Hall. Tickets:

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

$30 per person. Flatonia is located at Exit 661 off I-10, between Houston and San Antonio. www.flatoniachamber.com.

(361) 865-3920. Email: flatoniacofc@sbcglobal.net 22ND ANNUAL REDBUD FESTIVAL April 18 Denton-This award-winning event celebrates “The Redbud Capital of Texas” and Arbor Day with a Home & Garden Show, free seminars, Kids Zone, live music & environmental activities. Don’t miss the live TRASHion Runway Show with designer fashions made from reused and recycled items. Free admission. 10am-4pm. Held at Denton Civic Center. (940) 349-8737 www.kdb.org LUBBOCK ARTS FESTIVAL April 18-19 Lubbock- Enjoy the largest fine arts and crafts event in West Texas!

Festival presents visual art, music, theater, dance, and children’s activities. Lubbock Memorial Civic Center. (806) 744-2787 HERITAGE JUBILEE April 18-19 Terrell-BBQ cook-off, live entertainment, dog show, 5K run, craft vendor booths, quilt show, motorcycle show, health & business expo, car show, rodeo and carnival in Ben Gill Park. (972) 563-5703 www.terrelltexas.com ENNIS BLUEBONNET TRAILS FESTIVAL April 18-19 Ennis-Discover a springtime celebration of fine arts and crafts, performing artists, bluebonnet & wildflower trails, car show (Saturday only), children’s activities, live music, and entertainment. Downtown Ennis. In its 64th year as Texas’ Official State Bluebonnet Trail.

(972) 878-4748 www.visitennis.org WWW.GRUENEMARKETDAYS.COM April 18-19 and May 16-17 New Braunfels - Shop the exceptional handmade quality of sculptors, potters, jewelers, unique craftsman & specialty Texas-made foods, while enjoying live entertainment & 25 specialty stores & restaurants.

Historic Old Gruene. (830) 832-1721 www.gruenemarketdays.com 6TH ANNUAL WINE WALK April 23-25 Granbury-A casual venue offering guests the opportunity to mingle with 20 Texas wineries, food purveyors, cheese makers, artists, vendors & musicians around historic Granbury Square. 12noon-8pm each day. Tickets: $25 online & $30 at gate. Sip & Savor event on April 23 ($125/ticket) with celebrity chefs. Benefiting local charities and scholarships. www.granburywinewalk.com TEXAS STATE FESTIVAL OF ETHNIC CULTURES April 24-25 Ballinger-Join in this multicultural celebration with ethnic foods, arts and crafts, music, children’s events, bike festival and Miss Ballinger pageant at the county courthouse grounds. (325) 365-2333 CHICKEN - FRIED STEAK FESTIVAL & CROSSROADS BALLOON RALLY April 24-26 Lamesa-Declared the “Legendary Home of the Chicken-Fried Steak” by the Texas Legislature, Lamesa celebrates in Forrest Park with a chicken-fried steak cook-off & dinner, wine-tasting, music, classic car

show, team-roping competition, ranch rodeo, 5K Run, cowboy church, pony rides and games, and a hot air balloon rally.

For more information: (806) 777-1171 www.ci.lamesa.tx.us 35TH DENTON ARTS & JAZZ FEST 2015 April 24-26 Denton-Celebrating music & art with seven stages of entertainment!

See Jazz Stage head-liners Randy Brecker, Dr. John & The Nite Trippers, Brave Combo, UNT One O’Clock Lab Band, and many more.

Also enjoy great food, fine arts & crafts, and kid’s activities. FREE admission! Quakertown Park (two blocks off Courthouse Sq). No pets or coolers. (888) 381-1818 or (940) 565-0931 www.dentonjazzfest.com 40TH ANNUAL GERMANFEST April 24-26 Muenster-Enjoy continuous entertainment with Brave Combo, John Conlee, Alpinmusikanten, Alpine Village, Valine Polka & Das Ist Lustig, and Flashback Friday’s tribute bands “Hard Nights Day” and “Mullet Boyz”. Enjoy great German food booths, Texas wineries, arts/crafts, large BBQ cook-off, fun run, carnival rides, Nagelschlagen, bike rally, water bumper boats and more. www.muensterchamber.com or www.germanfest.net TEXAS SANDFEST April 24-26 Port Aransas-One of the largest Master Sand Sculpting Competitions in the USA! Amateurs & families participate in open competitions.

Enjoy the invigorating sun & surf and spend the weekend enjoying great food, accommodations, entertainment and island shops of all kinds. More than 100,000 attendees enjoy Texas Island Style!

1-800-45-COAST www.portaransas.org MUSIC MAKES A CELEBRATION April 25, May 23, June 27, July 25, Aug 23, Sept 26, Oct 24 Anderson-On these 4th Saturdays, experience life & music of early Texans & travelers at Fanthorp Inn. Tap a tambourine or take a turn on the dance floor led by our dance instructor. Costumed guides also describe workings of an Inn and its successful Innkeeper. 11am-3pm.

Fanthorp Inn State Historic Site, 579 S. Main off Hwy 90 (ten miles east of Hwy 6).

(936) 878-2214 www.birthplaceoftexas.com AUTISM SHARE WALK April 25 The 2015 Autism SHARE Walk will be held at Grande Communications Stadium beginning at 9:00am! Join us in supporting children with all special needs and their families! Tons of family fun to be had including: bouncers, dancing, resource fair, rolling video games, therapy horses, and much more! 9 AM-12 PM. 801 N. Loop 250 W. Midland, TX 6TH ANNUAL MAYFEST April 30-May 3 Seagoville-Enjoy live entertainment, carnival rides, food & craft vendors, car show, karate tournament, co-ed softball tournament & more! Presented by Seagoville Chamber of Commerce.

For vendor opportunities, call (972) 287-5184 FIESTA WEST TEXAS May 1-3 Ector County Coliseum. 432-288-5321 www.myfiestawesttexas.com

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

SAFETY TIPS THREE THIN GS TO KN OW FO R CU RREN T A N D N E W BU SIN ESSOWN ERS During this economic instability, some adventurous entrepreneurs have decided to take the dive into a new future, while others are looking to expand into new ventures; however there are a few key points that should be acknowledged for any new or existing business. There are an infinite number of results your new adventure can create. You can grow and expand to great measures of success or you can end up never leaving the ground if you don’t take the time to ensure basic compliance as it relates to the area of safety.

1) Care and Maintenance Make sure that you have researched the industry requirements relative to your vocation. Are you and your employees protected both legally and personally? Safety equipment and safety laws necessary for a particular industry may vary. It’s important to verify the standards and recommendations set forth by agencies such as NFPA, ANSI, ASME, CGA etc., in order to not only attain the right protective gear for the job, but also to ensure the proper maintenance and care for the equipmentas well as the user.

Identifying and understanding general safety equipment rules and regulations can prevent injuries or fines. Safety gear incorrectly or improperly used or maintained may result in a minor or major accident which could lead to job loss or a business closure. It’s important to use safety gear as per the instructions and the job intended. Successful business owners understand this principle and are on the average proactive and promote safety above profits.

2) Training Training and adequate safety equipment are essential tools needed to ensure the safety of all employees and customers. OSHA is a great resource to start researching the

required training for almost every industry. It is important to remember that OSHA merely sets a minimum baseline of expectation and customers or specific jobs may require more than the minimum. Consulting with a professional in the industry will help identify which training is mandatory or optional. New hire training is an example of basic entry level coursesproviding the student with a broad range of topic proficiencies. Alternately, training in confined space entry is more job and industry specific and may not be necessary for all business models. American Safety Services welcomes the opportunity to review and develop ongoing safety training benchmarks maintaining compliance for both customers and their employees.

3) Inspections Frequent and documented equipment and records inspection is important and cannot be overlooked.

Routine and daily inspections of everything from assets to personnel are markers for success. Although this process can be tedious and seem unimportant, ramifications from improper inspections can lead to catastrophic results.

Scheduling monthly fire extinguisher inspections is an example of a life-saving tool that if left unchecked could be useless in the event of a fire. By performing regular audits and equipment checks, businesses and employees can avoid compliance failures with government and industry laws while also creating a cultural awareness within the organization that results in a safety first environment.

Making safety a priority at every level is and should be the goal for every organization.

Aaron Campbel American Safety Services, Inc.

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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Cares

SHARE

is Turning 10!

Since opening our doors in 2005, SHARE has grown tremendously from a small church ministry, to an independent 501(c)3 serving hundreds of family members in the Permian Basin. SHARE provides support to the entire family. From parent and sibling support, to our family celebrations, SHARE allows families who have a child with special needs know that they are not alone.

There are monthly parent support groups that meet in Midland and Odessa. Our parents are our best resource.

They come together to share information and to lean on each other. Many parents who have a child with special needs tend to isolate themselves. When they meet other families who have been where they are, it makes the world seem like a much friendlier place.

Best known for the Friday night respite program, SHARE provides one Friday night a month to each family. Four hours where the parents can drop off their child with special needs and their siblings, so that they can get a much needed break. Many of our families don’t get time just for themselves, something that is essential for any parent. Parents use respite night to do anything from enjoy a date night, go grocery shopping, or just go home and relax. Meanwhile, volunteers and SHARE staff keep the children entertained with games, crafts and movies.

SHARE parent, Anna Castillo was quoted as saying “When we went to our first Autism walk and I found out about SHARE I just couldn't believe it. I couldn't believe that something like this was here....in the Permian Basin....for our family.” On SHARE staff Anna says “They absolutely 26

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

LOVE their careers. It is truly their passion and a major part of their lives. I know why they do it all....for our families.

They do it because they care about us. They do it because we matter. They want all families like ours to have this wonderful resource and support system.”

SHARE provides all services to our families at no cost. We have two fundraisers each year, the Shooter’s that SHARE Clay Shoot, hosted by Concho each July, and coming up this month, the Autism SHARE Walk.

The Walk began six years ago, drawing a crowd of 300, and this past year the Walk drew over 2,200 friends, family members and others wanting to show their support, raise awareness, and celebrate.

On April 25th the Walk will take place at Scharbauer Sports Complex. There is something for everyone, including a resource fair, and a children’s area, complete with therapy horses, face painting, bouncers, and more.

This year Coca-Cola and Albertson’s have teamed up and are donating the food to have a cook-out after the Walk. All proceeds will benefit SHARE and the families they serve.

For more info visit www.spc.convio/autismsharewalk 5514 Champions Drive, Midland, TX Day-of Registration opens at 8:30am Opening Ceremonies begin at 9:00am Autism SHARE Walk steps off at 10:00am All proceeds will stay local to help our family and friends with special needs here in the Permian Basin.

For more information about how you can help, become a volunteer or to donate visit www.sharewtx.org Sharing Hands A Respite Experience 3500 N. A St., Suite 2200 Midland, TX 79705 Phone: 432-818-1253

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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TECH

BITES

Source: Joan E. Solsman • www.cnet.com

SONY LAUNCHES PLAYSTATION VUE AS BIGGER, PRICIER INTERNET TV

Sony just launched its PlayStation Vue, an Internet TV service accessible - for now - just through its gaming console and only in New York, Philadelphia and Chicago.

The entry-level price is $49.99 a month.

PlayStation Vue, which is offering 7-day free trials, is the latest in a series of "over-the-top" TV services to hit the Web in recent months, after the television industry for years hemmed in options that diverged from the traditional cable or satellite bundles of channels. Warming to such services shows how networks and TV providers have recognized the long-term importance of appealing to a "cord cutter" -- someone who forsakes a traditional pay-TV for Internet-based video.

But Vue, with its relatively high $50 price for its basic tier of service, will test whether Internet television can win adherents based not on significant price savings but on the new merits of a Web-based system. Paying for Vue in addition to paying an Internet service provider creates a total cost that approaches what a consumer might pay for both video and Internet from a cable company. Vue will also indicate how much the PlayStation base of users is interested in entertainment coming all through one source.

Sony said it is introducing Vue as an entertainment solution for households that already have the company's PlayStation 3 and 4 gaming consoles. The PlayStation user, by and large, is typically male, aged 18 to 39.

"That gamer household is something we've defined even further," said Daniel Myers, Vue's head of product. "Lots of 28

people use these platforms to consume Netflix and other digital media. The household is bigger than just the guy who bought the PlayStation."

Vue streams live, on-demand and DVR TV over the Internet.

The company has an iPad application in the works. PlayStation gaming consoles are among the most common devices used to stream video from the Internet to a TV. Sony has an installed base of 35 million PlayStations, PS3 and PS4 combined, in the US. Myers said Vue will add more device support "in the mobile space and the TV-connected space," referring to handhelds and other boxes along the lines of a Roku or Chromecast, without specifying devices. Though Vue is limited for now to New York, Chicago and Philadelphia, he said Sony will add more US cities later this year.

Vue's collection of channels is a mix of local and regional networks, broadcast staples and cable options. It includes broadcasters CBS, NBC and Fox, as well as many of those companies related channels, such as Fox's Fox News and NBCUniversal's Bravo and SyFy. It also includes networks from Discovery, Scripps, Turner and Viacom. AMC channels -including the namesake network that is home to "The Walking Dead," television's top-rated scripted series -- will be added to the service next month.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

Notable Vue absentees: Disney's ABC broadcast network and its all-important king of cable sports, ESPN. It also lacks premium channels like HBO or Showtime.

For an additional $10, subscribers can add local sports channels. New York gets the YES Network for Yankees games, and Philadelphia and Chicago get Comcast SportsNet for those cities. And for yet another $10, subscribers get more niche lifestyle, music and family channels.

One of the major differences between Vue and rival Sling TV, which launched last month as the first true Internet multichannel live-TV service, is that Vue includes DVR and on-demand capabilities. Once viewers tag a favorite show using the DVR feature, they will automatically have access to recorded episodes of that show for 28 days, without storage size or scheduling restrictions. The previous three days of much programming is available on demand without the need to schedule recordings.

Another major difference is price. Vue's entry price is $50 a month; Sling TV's cheapest option is $20 a month.

Vue's higher price point raises the question about whether its differences from cable and satellite norms -- such as not locking in customers with contracts, unwavering rates, the ability to search for TV in a more robust and intuitive way than the gridlike guide -- will hold sufficient attraction for people

to compensate for having fewer channels than cable for not much less money, when the cost of Internet service is added.

Myers said that the way Vue serves up TV will make customers feel like they're getting more than they did before because of features that make it easier to find and get what they like to watch.

"There's been a lot of great TV made recently, and a lot of great TV in general, that people can't find. It's about the mechanism by which you can make it available," he said. "How can you make it more about what I want to watch and less about what's on at that given time?"

PlayStation Vue is Sony's response to that question. But Vue raises another: Will people pay top dollar for it? And that's a plot -- borrowing from the land of TV -- that is to be continued.

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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PBE NEWS BRIEFS WATCHING THE BASIN

FALLING RIG COUNTS DRIVE PROJECTED NEAR-TERM OIL PRODUCTION DECLINE IN 3 KEY U.S. REGIONS EIA's most recent Drilling Productivity Report (DPR) indicates a change in the crude oil production growth patterns in three key oil producing regions: the Eagle Ford, Niobrara, and Bakken. The DPR estimates, which were issued on March 9 and cover the months of March and April, include the first projected declines in crude oil production in these regions since publication of the DPR began in October 2013. However, with production gains continuing in other regions, particularly the Permian, overall crude oil production in regions tracked by the DPR rose slightly in March to 5.6 million barrels per day.

Total production in the DPR regions in April is expected to be virtually unchanged from its March level.

In any given month, there are new wells and legacy, or continuing, wells. Production from legacy wells declines over time, but recently the rate of decline in some regions has been increasing. This means that, in order for overall production to increase, operators must drill enough new wells to overcome the decline from legacy wells. As fewer wells are drilled, this decline becomes a significant challenge to overcome.

level of rig performance is so much higher now than several years ago, it is not clear that productivity gains will offset rig count declines to the same degree as in 2008-09.

The Permian region, where as late as December 2013 half the operating rigs were vertical rigs, still appears to be experiencing significantly larger productivity improvements than other DPR regions. In general, average production from a vertical well is significantly smaller than that from a horizontal well. As more vertical rigs are brought offline, the ratio of vertical to horizontal rigs in the Permian, which has only fallen below 1:1 in recent months, is coming closer to, but remains above, the vertical-to-horizontal rig ratio in the other DPR regions.

Source: www.eia.gov

The recent decline in crude oil prices has led operators to reduce the number of rigs in use. DPR results show sharp decreases in rig counts in all regions, starting in January and February of this year. When producers make the decision to lay down some drilling rigs, they generally start by idling the older, least-efficient ones first. The effect on production depends on the productivity of the remaining rigs.

For example, falling crude oil prices during the 200809 recession led to decreases in rig counts, but not decreases in production. At that time, lower rig counts were more than offset by increases in the productivity of remaining rigs, as those more productive rigs required fewer days to drill and complete a well, had higher initial production rates, and were more able to drill multiple horizontal wells from a single pad. Because the base 30

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

WATCHING THE SHALE

U.S. SHALE OIL FIRMS BRACE FOR MORE PAIN AS CRUDE RESUMES SLIDE With the prospect of another plunge in crude prices looming after two months of stability, U.S. shale oil producers may face another round of spending cuts to conserve cash and survive the downturn.

A deeper retrenchment would have far-reaching effects.

Additional cutbacks would further gut the alreadyhemorrhaging oilfield services industry and may heighten expectations for a steeper drop in U.S. crude output later this year. They would also reinforce the United States' emerging role as the world's "swing producer," with dozens of independent companies that can quickly ramp up production in good times and dial it back in a downturn.

"If I were an oil company today, I would talk about one thing: how far can you cut costs," said Fadel Gheit, an oil analyst at Oppenheimer in New York. "They cannot control anything else."

Gheit said he expected a new wave of capital budget cuts starting in May, when much of the energy industry reports quarterly results.

U.S. oil companies have slashed spending 20 to 60 percent since the price of oil fell by half from June to January, and oilfield services firms shed more than 30,000 jobs, according to Reuters compilations of public disclosures.

earnings in May, though ConocoPhillips (COP.N) has already announced cuts on Tuesday.

Conoco said it expected to spend about $11.5 billion per year over the next three years, down from a prior forecast of $16 billion. Oil producers can save money by shrinking their rig fleets and delaying so-called completions, which include fracking, of wells to bring them online, which accounts for 60 to 70 percent of a well's total cost.

Anadarko expects to end this year with 420 to 440 uncompleted wells, while EOG Resources Inc (EOG.N), often considered the strongest U.S. shale oil company, expects to have 285, with postponed completions saving it about $500 million.

OUTPUT DIP? The U.S. land rig count has already fallen some 43 percent from its 2014 high of 1,876 in November to 1,069 in March, according to Baker Hughes. More declines are likely. That trend, along with deferred completions, has some executives predicting national crude output will drop earlier than official forecasts.

Debt rating agency Moody's estimates that about a fifth of the North American exploration and production companies it follows will slash budgets by more than 60 percent this year while more than half will cut spending by at least 40 percent.

The Energy Information Administration (EIA) latest forecast from March 10 sees U.S. output peaking in May at 9.46 million barrels per day (bpd) and then dipping to 9.41 million in June.

But in a sign the drop could come sooner, the agency now expects output in two of the biggest U.S. fields, the Eagle Ford shale in Texas and the Bakken in North Dakota, to fall in April, for the first time since it began tracking drilling in those oilfields in 2013.

After a pause brought a sense of relief, the price slide resumed in March as U.S. benchmark West Texas Intermediate (WTI) fell 12 percent in one week to $42 on concerns about lingering global oversupply. Citibank and Goldman Sachs have said oil could tumble to $30 or even $20.

Still, those initial declines, projected at around 18,000 bpd, would make only a small dent in global oversupply estimated at about 1 million bpd. Some analysts say that as soon as prices inch up companies may quickly bring their backlog of wells online, limiting any possible price gains.

One Houston banker said acquisition chatter has picked up in the past two weeks but that no company wanted to be the first to seek buyers given potential investors and sellers remain wide apart on valuations. Companies have made clear they will not hesitate to trim more to avoid credit rating downgrades and further stock sell offs.

In the Bakken, for example, there are 800 uncompleted wells, state officials said. The tally is growing as producers wait to see if low prices trigger a roughly $5 billion North Dakota production tax break in June, said Lynn Helms, the state's top oil regulator. While oil producers brace for more cuts, they have not given up hopes for a rebound and assure investors they will be ready to tap uncompleted wells and boost the number of rigs they operate.

"We don’t see value in chasing growth in this environment," Al Walker, chief executive of Anadarko Petroleum Corp (APC.N), a top shale company, said this month.

Oil firms slashed tens of billions of dollars from their capital budgets between November and February. Many have cut costs already twice and could do it again after first-quarter

“First, our overarching goal this year is to prepare for oil price recovery," Bill Thomas, EOG’s chief executive officer, told investors while discussing the company’s fourth-quarter earnings. "We would be ready to respond swiftly when oil prices improve."

Source: Reuters

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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WATCHING THE STATE

OIL PRICE DECLINE LEADS TO LOWER TAX REVENUES IN TEXAS The decline in spot oil prices in the last half of 2014 and first month of 2015 has reduced oil and natural gas production tax revenues in some of the largest oil- and natural gas-producing states.

Texas, North Dakota, Alaska, and Oklahoma are four of the five top oil- and natural gas-producing states, and they derive a significant share of their unrestricted operating revenues from taxes on oil and natural gas production. Although California produces more oil than both Alaska and Oklahoma, its economy is much larger, making it relatively less affected by changes in oil and natural gas prices and production.

•Texas collected $583 million in tax receipts from oil and natural gas production in August 2014, but tax revenue declined by 40% to $352 million in January 2015, based on data from the state's comptroller. EIA estimates crude oil and lease condensate production in Texas also increased through December, growing from 88 million barrels to 107 million barrels from January to December 2014.

•North Dakota' s tax revenue from oil and natural gas production decreased from $323 million in August 2014 to $254 million in January 2015, a 21% reduction.

Monthly production has continued to increase through

32

December even as prices declined, according to the latest production data.

•Alaska relies on revenue from crude oil production for 90% of its operating budget. The state's 2015 revenue projections assumed oil prices at $105 per barrel.

According to initial oil and natural gas production tax receipts received by the Alaska Tax Accounting System, monthly oil and gas production tax revenue in August 2014 was $108 million. In January 2015, revenue from these taxes was $26 million. The oil and natural gas production tax represents one of the four primary components of petroleum revenue for the state, with the others being corporate income taxes, property taxes, and royalties collected by the Alaska Permanent Fund Corporation.

•Oklahoma collected $62 million in funds from production oil and natural gas taxes in August 2014.

This value declined to $43 million in January 2015, a drop of roughly 30%, based on information from the Oklahoma Tax Commission. Oklahoma's production was relatively flat during this period.

The production estimates and tax data referenced in this story are preliminary and are subject to change.

Source: www.eia.gov

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

WATCHING THE GOVERNMENT

EIA LAUNCHES NEW DATA ADD-IN TOOL FOR MICROSOFT EXCEL FOR WINDOWS The U.S. Energy Information Administration (EIA) has released a free data add-in for Microsoft Excel for Windows that builds on the well-known Federal Reserve Economic Data (FRED) add-in and allows users to find, download, and update EIA's energy data and FRED's economic data directly in any Excel spreadsheet.

With this add-in, users can save spreadsheets with their favorite data series and reopen them at any time and update the data with a single click. This ability to easily access the latest available data will save time and effort for analysts performing periodic analyses of energy and economic data. The tool mirrors the functionality of the existing economic-data-only add-in provided by the St. Louis Federal Reserve Bank.

Users can browse energy data categories or search keywords to find domestic and international data series,

short-term forecasts, and long-term projections. A user guide and installation instructions are available to provide further guidance, along with a short video tutorial. Like several other new data products from EIA, this tool is initially being made available through EIA's beta site in order to solicit feedback and incorporate suggested improvements into the final release.

The add-ins from EIA and the St. Louis Federal Reserve Bank are powered by application programming interfaces (APIs), which, along with the add-ins themselves, are offered free of charge as part of each organization's commitment to open data. Throughout EIA's website, the API Key symbol is used to denote a link to a page with the series identifying data (ID) or source key and sample API calls. The series ID can be copied and pasted directly into Excel and the series data fetched with the EIA add-in.

Source: www.eia.gov

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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WATCHING THE NATION

GROWTH IN RESIDENTIAL ELECTRICITY PRICES HIGHEST IN 6 YEARS, BUT EXPECTED TO SLOW IN 2015 Residential electricity customers in most areas of the country experienced large increases in retail electricity prices during 2014, with the average U.S. residential price increasing 3.1% over the previous year. The increase represents the highest annual growth rate since 2008. EIA forecasts that prices will increase during 2015, but at a slower pace than in 2014.

Residential electricity rate increases during 2014 ranged from 1.3% in the Pacific Coast states to 9.9% in New England. Retail electricity prices have risen for various reasons. Many electric utilities purchase their power from regional wholesale electricity markets, which, at a national level, experienced higher prices last year. Other reasons commonly cited for higher retail electricity prices are the increased investment in transmission and distribution infrastructure, rising requirements to generate electricity from renewable energy sources, and utility investment in demand-side efficiency.

Despite recent increases, retail electricity prices have historically risen at a lower rate than the general rate of

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inflation, and the real price of electricity is lower than it was prior to 1995. Measured in constant 2014 dollars, the U.S. residential electricity price averaged 12.5 cents per kilowatthour in 2014, up slightly from its lowest point (in real terms) of 11.1 cents per kilowatthour in 2002.

The electricity industry likely will continue to invest in upgrades to transmission and distribution systems in the coming years as well as expand renewable generating capacity, the costs of which will be passed through to retail customers. Costs associated with environmental compliance also will affect future retail electricity rates.

However, power generation fuel costs have fallen in recent months, especially the cost of natural gas. These lower costs are likely to offset some of the increases in utilities' nonfuel costs and thus slow the rate of retail electricity price increases. EIA's March edition of the Short-Term Energy Outlook projects residential electricity prices will rise by 1.0% during 2015, which would be the lowest increase since 2010.

Source: www.eia.gov

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

WATCHING OFFSHORE

STATOIL MAKES NORWEGIAN SEA GAS DISCOVERY Norwegian energy firm Statoil has made a gas discovery near the Aasta Hansteen field in the northern part of the Norwegian Sea, the company said on Tuesday.

"The Snefrid Nord discovery increases the resource base for the Aasta Hansteen field development project by around 15 percent," Irene Rummelhoff, Statoil's senior vice president of exploration Norway, said.

Preliminary calculations put the find at between five and nine billion standard cubic metres (Sm3) of recoverable gas, the Norwegian Petroleum Directorate said in a separate statement.

The discovery will now be further evaluated for future tie-in to the Aasta Hansteen infrastructure, Statoil said.

The partners in the licence are Statoil with 51 percent, Wintershall, the oil and gas arm of chemicals group BASF, with 24 percent, OMV with 15 percent and ConocoPhillips with 10 percent.

Source: Reuters

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

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WATCHING THE WORLD

BRITAIN HANDS LIFELINE TO NORTH SEA OIL INDUSTRY WITH TAX CUTS Britain announced in March a series of oil tax cuts and the creation of an investment allowance, heeding calls for help from battered North Sea oil and gas companies juggling high costs and a price slump.

percent, introduce an allowance aimed at reinvigorating investments and, in a surprise move, reduce extra charges imposed on the North Sea's oldest fields to 35 from 50 percent from 2016.

The changes are a shot in the arm for Britain's North Sea, where oil production has fallen to the lowest level since fields started pumping fossil fuels in the mid-1970s and fresh investments have stalled dramatically.

"It's clear to me that the fall in the oil price poses a pressing danger to the future of our North Sea industry - unless we take bold and immediate action," Osborne told parliament in his annual budget speech.

Finance minister George Osborne said he would cut a supplementary tax charge on oil companies to 20 from 30

These measures are expected to save companies around 1.3 billion pounds ($1.9 billion) in tax payments and will result in at least 120 million barrels of oil equivalent in additional production over the coming five years, the government said.

Shares in BP and Shell, traditional investors in Britain's North Sea, were trading 1.1 percent and 1.7 percent higher at 1440 GMT, while smaller firms with higher exposure to the basin also rose.

BP and Shell said they welcomed the tax cuts but stressed that tackling high costs was essential and further changes were needed.

The oil industry, worth around 5 billion pounds a year to the state, has been urging the government for months to help it stem record-high costs that have been compounded by a halving in oil prices since last summer.

"The chancellor finally let the cat out of the bag," Angela Savin, tax partner at global legal practice Norton Rose Fulbright, said. "The extent of the changes is likely to enable a great deal of support for the industry."

North Sea investments worth around 25 billion pounds are currently unsanctioned as companies have been waiting for the government to intervene.

Osborne also unveiled 20 million pounds of government funding for new seismic surveys in under-explored areas of the North Sea. Although the tax changes provide needed support, energy companies are reliant on a rise in oil prices to make the necessary long-term investments to retrieve the North Sea's remaining oil and gas.

Sustaining growth will require "a mixture of strengthening oil prices and confidence that taxes are not going to rise once again", said Ian McLelland, analyst at Edison Investment Research. ($1 = 0.6820 pounds.)

Source: Reuters

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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

polos

t-shirts

koozies

pens

business cards

caps

flashlights knives

misc.

Promotional Products • TV/Video Production • Graphic Design • Photography

432-559-5886 promoitems@mad-ads-media.com

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

37

RESTAURANT

BITES

by Marcy Madrid

TACOS OJ When searching for a good restaurant to eat at in Fort Stockton, Tacos OJ rose to the top of the list among locals we asked. After their sentiments were confirmed though dozens of positive comments on Trip Advisor from travelers, I knew we needed to get in touch with the people behind the taco legend.

When I asked Rafael Longoria if he owned this popular Fort Stockton lunch spot, he quickly said "no my wife Aida is the owner ma’am, I’m just one of her workers." Rafael said his wife was working at a local nursing home when she kept telling people she really wanted to open her own restaurant. Although many laughed at her dream as something too farfetched, her husband Rafael took it to heart and started saving.

Just a short time later, Aida opened her own restaurant, with a little help from her husband of course. The original location on Nelson Street could only fit 7 tables but after a few more years of hard work and more saving, the determined couple was able to move to their current, much larger location off of highway 1053. 7 years after they first opened the doors, Taco OJ is now a booming lunch and dinner spot during the work week and popular breakfast option on the weekends.

I asked Rafael what his favorite memories of this journey were and without hesitation, he proceeded to explain how special it was to see 38

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

how so many of their friends and family offered their time, skills and energy to make sure they succeeded.

"My daughter Viviana was a hairstylist in Odessa when we called her about opening the restaurant. She originally decided to leave her job for 2 weeks to come help us get started. 3 years later, she finally felt like we were in a good enough place for her to go back to the life she left in Odessa. The fact that she sacrificed so much for 3 years to help us out, was priceless."

All the hard work and sacrifice definitely paid off as locals and out of town travelers alike fill Taco OJ’s parking lot on a regular basis.

All the menus items are homemade and made fresh straight from his wife’s personal recipes. Since it is her restaurant, it’s fitting that the name also comes from her hometown of Ojinaga, Mexico.

Most popular dishes are the Tacos OJ made with beef fajita meat and the Molcajet which is a meat dish featuring beef, chicken, shrimp and sausage with Aida’s special ground salsa.

Tacos OJ 1303 N Main St, Fort Stockton, TX Off of highway 1053 Call (432) 756-3731 M-F: 11am - 9pm Sat: 8am-9pm • Sun: 8am-3pm

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

39

WAKING JESUS

by Daniel Stephens

Daniel Stephens is the Senior Pastor of MidCities Community Church, since 2006. He is the honored husband to Kayla Stephens, a proud father of twin sons Jonah & Jude, daughter Kampbell and youngest daughter Karis Anna.

Storms in West Texas usually consist of wind and dirt. I remember years ago walking across the campus of Texas Tech as a student while small towns like Muleshoe and Cotton City seemingly flew by me in particle form. Most students would hurriedly rush towards their next class for shelter unless their next class was across campus. In those moments, when your next class was on the other side of the largest campus in the nation, the demeanor of the students changed. The students pace actually slowed as they methodically, with squinted eyes, hiked through the sand storm and sideways rain like an inmate walking the green mile. Void of hope, they would acknowledge the other pilgrims passing by with a shaking of their head and a “Can you believe this?” smirk as if there was some comfort in knowing that they were not on this pilgrimage alone.

Last night I was reading about a storm to my six year old during her nightly bedtime routine. The storm 40

did feature the wind as a primary character much like my days in Lubbock, Texas, but its co-star was water from a nearby lake. (For those of us in the Permian Basin, lakes are bodies of water that gather in some communities where there is actual precipitation.) The men in the story had just shoved off from the shore of the lake when gradually the atmosphere began to change. As the wind picked up, the waves began to swell and crash on their vessel. What was going to be a pleasant boat ride with a group of friends became a chaotic mix of men trying to save themselves and one another. What’s interesting about this story is that one of the men in the boat was asleep while the storm raged on.

Waves were tossing them about as the rain kept falling down like a hammer on nails, and yet this guy just rolled over and kept sleeping. Finally, not knowing what to do after exhausting all their ability, strength and maritime knowledge, the friends woke up their leader who

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

was the man sleeping in the stern of the ship. “Don’t you care if we drown?” they asked. The man got up from his nap, commanded the winds to be quiet and still… and the wind and waves obeyed his voice! Then he looked at his friends and asked “Why are you afraid?” “ Do you not have any faith?”

As I read this story to my daughter I realized something.

Jesus, the man asleep in the story, was with his friends through the entire storm. He was available, accessible, and powerful enough to use the same voice that created the wind to calm it.

And Yet… It wasn’t until his friends had exhausted their own strength and ability.

It wasn’t until they lathered everyone up into a tizzy of frustration because they expected Him to wake up and do something of his own initiative.

It wasn’t until they were at the end of their rope… that they went to Jesus.

Jesus’ response? Where is your faith? Why would you allow this storm to fill you with fear when I am with you?

Why would you try to do it all on your own when I am available, accessible, and powerful enough to calm the stormy seas? Why didn’t you wake me sooner?

Like Jesus’ friends, my first reaction to any wind or storm that may come my way in life is to try to figure it out in my own strength. I try to think it through, talk it through, invent and implement a plan to get out of the storm.

I guess it is pride that keeps me from waking Jesus.

Thinking I can do it, thinking I can make it happen with my own ingenuity. Too often going to Jesus in prayer is a last resort. Everyone experiences storms. Often it’s storms in our personal lives that can bring disappointment, hurt, or frustration. Even economic storms caused by recent plummeting oil prices can send waves of financial chaos and insecurity crashing down on our lives, businesses, and the people we care about. Maybe it’s time to stop trying to make it happen in our own strength? Maybe it’s time to wake Jesus.

Follow Daniel on Twitter: @DanielBstephens

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

41

U.S. RIG COUNT - TEXAS

States &

through April 4, 2015

BAKER HUGHES RIG COUNT

RIGDATA RIG COUNT

Four Week Average 2013

Four Week Average 2014

Last Week

This Week

Four Week Average 2013

Four Week Average 2014

Last Week

This Week

Waiting to Spud

Texas RRC District 1

128

72

67

71

129

74

73

70

6

Texas RRC District 2

82

63

63

58

86

58

59

52

10

Texas RRC District 3

52

22

19

20

61

23

22

25

0

Texas RRC District 4

36

23

22

22

37

18

20

20

2

Texas RRC District 5

9

5

5

4

8

5

6

4

0

Texas RRC District 6

34

25

22

20

33

24

22

23

1

Texas RRC District 7B

11

5

5

5

16

7

10

7

4

Texas RRC District 7C

87

43

43

40

88

48

47

47

3

Texas RRC District 8

307

195

183

184

314

183

186

176

6

Texas RRC District 8A

32

14

13

15

34

14

17

13

2

Texas RRC District 9

19

2

1

2

29

4

5

5

3

Texas RRC District 10

65

23

21

20

68

24

24

21

0

Texas Total

862

491

464

461

913

482

491

463

37

U.S. Totals

1,809

1,112

2,053

1,189

1,182

1,134

67

Districts

1,069 1,048

COPYRIGHT Š 2015 RIGDATA P.O. Box 820547 Fort Worth Texas 76182-0547 1-800-627-9785 | www.rigdata.com This report is protected under United States and international copyright laws and is intended for the exclusive use of the subscriber. Any unauthorized reproduction, retransmission, distribution, publication, broadcast or circulation of this report to anyone, directly or indirectly, without the express prior written consent of RIGDATA is prohibited. To order additional report copies at a reduced rate or for a corporate site license, please contact: 1-800-627-9785 42

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

TOP 35 DRILLERS RANKINGS Each month we track the activity of all the drillers and compile the results into a report that identifies the top 35 out of 100 drillers based on their footage drilled. Updated monthly, these reports also detail the number of well starts and the number of directional wells drilled by each of the top 35 out of 100. through April 1, 2015 Company

Footage Drilled

% of Total

Average Footage

Well Starts

% of Total

Directional Wells

1

Helmerich & Payne, Inc.

8,147,489

19.8%

10,692

762

15.8%

727

2

Patterson-UTI Drilling Company, LLC

4,995,744

12.1%

10,908

458

9.5%

435

3

Nabors Industries, Ltd.

3,319,486

8.1%

6,788

489

10.2%

420

4

Seventy Seven Energy, Inc.

2,117,227

5.1%

10,278

206

4.3%

204

5

Ensign Energy Services, Inc.

1,702,768

4.1%

7,403

230

4.8%

138

6

Precision Drilling Trust

1,650,457

4.0%

8,552

193

4.0%

185

7

Unit Corporation

1,386,949

3.4%

10,587

131

2.7%

123

8

Pioneer Energy Services Corp.

1,048,584

2.5%

11,038

95

2.0%

87

9

Trinidad Energy Services Income Trust

814,885

2.0%

8,488

96

2.0%

66

10

Sidewinder Drilling, Inc.

812,701

2.0%

10,419

78

1.6%

73

11

Cactus Drilling Company, LLC

808,950

2.0%

10,644

76

1.6%

76

12

Xtreme Drilling and Coil Services Corp.

779,284

1.9%

12,370

63

1.3%

62

13

Pinnergy, Ltd.

690,250

1.7%

9,082

76

1.6%

76

14

Oil States International, Inc.

554,144

1.3%

6,841

81

1.7%

36

15

Advanced Energy, LLC

547,411

1.3%

8,553

64

1.3%

57

16

Precision Drilling (US) Corporation

462,874

1.1%

10,286

45

0.9%

33

17

CanElson Drilling, Inc.

448,150

1.1%

10,930

41

0.9%

15

18

Frontier Drilling, LLC

412,576

1.0%

9,377

44

0.9%

38

19

Superior Energy Services, Inc.

400,789

1.0%

10,277

39

0.8%

26

20

SWN Drilling Company

400,188

1.0%

4,708

85

1.8%

85

21

Savanna Energy Services Corp.

399,378

1.0%

9,509

42

0.9%

12

22

Pense Brothers Drilling Company, Inc.

391,700

1.0%

10,586

37

0.8%

36

23

Latshaw Drilling & Exploration Company

365,604

0.9%

9,140

40

0.8%

40

24

Cyclone Drilling, Inc.

303,951

0.7%

6,332

48

1.0%

44

25

Scandrill, Inc.

281,440

0.7%

11,727

24

0.5%

23

26

SST Energy Corporation

237,725

0.6%

9,143

26

0.5%

26

27

Robinson Drilling of Texas, Ltd.

227,800

0.6%

11,390

20

0.4%

2

28

ProPetro Services Incorporated

226,000

0.5%

11,300

20

0.4%

1

29

Basic Energy Services, Inc.

224,636

0.5%

6,607

34

0.7%

9

30

Bison Drilling and Field Services, LLC

218,465

0.5%

12,137

18

0.4%

12

31

Independence Contract Drilling, Inc.

214,591

0.5%

11,922

18

0.4%

18

32

Lewis Energy Group, LP

201,100

0.5%

11,829

17

0.4%

17

33

Orion Drilling Company, LLC

199,900

0.5%

10,521

19

0.4%

19

34

Cade Drilling, LLC

190,310

0.5%

11,894

16

0.3%

16

35

Aztec Well Servicing Co.

178,431

0.4%

6,373

28

0.6%

16

Total Top 100 for year 2015

41,209,640

100.0%

---

4,813

100.0%

---

RANK

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

43

TOP 35 OPERATORS RANKINGS Updated every month, we track and rank the top

35 out of 100 operators based on their footage drilled.

Keep track of the most active operators with details on their number of well starts.

through April 1, 2015

RANK

Company

Footage Drilled

% of Total

Average Footage

Well Starts

% of Total

Directional Wells

1

Anadarko Petroleum Corporation

2,922,876

7.1%

10,988

266

5.5%

266

2

Chesapeake Energy Corporation

2,420,998

5.9%

10,481

231

4.8%

231

3

EOG Resources, Inc.

1,415,711

3.4%

10,565

134

2.8%

134

4

Marathon Oil Corporation

1,397,719

3.4%

14,409

97

2.0%

97

5

ConocoPhillips Company

1,193,012

2.9%

8,228

145

3.0%

126

6

BHP Billiton Limited

1,152,417

2.8%

13,885

83

1.7%

83

7

Chevron Corporation

932,524

2.3%

4,832

193

4.0%

71

8

Pioneer Natural Resources Company

919,318

2.2%

14,592

63

1.3%

60

9

QEP Resources, Inc.

904,802

2.2%

12,064

75

1.6%

72

10

Exxon Mobil Corporation

888,992

2.2%

5,051

176

3.7%

90

11

Occidental Petroleum Corporation

859,213

2.1%

11,159

77

1.6%

68

12

Concho Resources, Inc.

784,755

1.9%

10,192

77

1.6%

55

13

Devon Energy Corporation

737,849

1.8%

10,693

69

1.4%

66

14

Encana Corporation

712,396

1.7%

12,283

58

1.2%

58

15

Whiting Petroleum Corporation

700,668

1.7%

9,869

71

1.5%

70

16

Continental Resources, Inc.

643,140

1.6%

7,226

89

1.8%

89

17

EP Energy E&P Company, LP

606,594

1.5%

10,110

60

1.2%

53

18

Noble Energy, Inc.

573,176

1.4%

9,882

58

1.2%

58

19

Energen Resources Corporation

530,300

1.3%

10,006

53

1.1%

49

20

Apache Corporation

516,337

1.3%

9,742

53

1.1%

43

21

SN Operating, LLC

485,500

1.2%

17,981

27

0.6%

27

22

American Energy Partners, LP

460,007

1.1%

11,500

40

0.8%

40

23

Oasis Petroleum North America, LLC

453,796

1.1%

10,805

42

0.9%

42

24

Antero Resources Corporation

431,050

1.0%

13,062

33

0.7%

33

25

CrownQuest Operating, LLC

408,200

1.0%

12,006

34

0.7%

1

26

Southwestern Energy Company

375,200

0.9%

4,576

82

1.7%

82

27

Laredo Petroleum, Inc.

371,000

0.9%

11,968

31

0.6%

16

28

Ultra Petroleum Corp.

363,651

0.9%

12,122

30

0.6%

30

29

Athlon Holdings, LP

356,466

0.9%

9,634

37

0.8%

13

30

Murphy Oil Corporation

347,000

0.8%

10,844

32

0.7%

32

31

EQT Corporation

345,234

0.8%

7,672

45

0.9%

44

32

EnerVest Management Partners, Ltd.

333,588

0.8%

9,531

35

0.7%

35

33

SandRidge Energy, Inc.

330,166

0.8%

5,693

58

1.2%

58

34

WPX Energy, Inc.

312,103

0.8%

6,640

47

1.0%

47

35

SM Energy Company

308,165

0.7%

7,704

40

0.8%

39

Total Top 100 for year 2015

41,209,640

100.0%

---

4,813

100.0%

---

44

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

Source: www.eia.gov

COLD WINTER WEATHER INCREASES NORTHEAST DISTILLATE DEMAND, BUT CONDITIONS ARE MODERATING The Northeast is experiencing a colder-than-normal winter.

Population-weighted temperatures from October through February were 11% colder than the National Oceanic and Atmospheric Administration (NOAA) projected at the start of the heating season, 10% colder than the 10-year average, and 1% colder than last winter. The cold weather increased demand for both distillate fuel and natural gas for residential and commercial space heating. As natural gas demand for space heating increased, the natural gas supply infrastructure reached its limits and could not provide enough natural gas to meet overall demand, which also includes commercial, industrial and power generation uses. One result was the curtailment of natural gas supplies to interruptible customers, who are mostly industrial users and electric generators, who responded to curtailments by increasing their own use of distillate fuel. Some customers also switched voluntarily from natural gas to distillate as natural gas prices spiked above distillate fuel prices.

spot price of ultra-low-sulfur diesel fuel (ULSD) to increase by $0.35 per gallon (gal) between January 23 and February 23, on top of a $0.31/gal increase attributable to the rise in the price of crude oil over the same period. As of February 23, the price of ULSD was $2.31/gal. As temperatures moderated and operations normalized along the petroleum supply chain, prices have since fallen. As of March 17, the price of ULSD in NYH was $1.71/gal (Figure 1).

More than 80% of the homes in the United States that rely primarily on heating oil for space heating are in the Northeast.

As a result, cold weather has a greater impact on distillate demand in the Northeast than in other regions of the country.

However, over the past several years, that impact has become less pronounced as consumers have turned to other sources of energy for space heating. Since 2010 the number of Northeast households that use heating oil as the primary space heating fuel has declined by 16%, reducing the cold weather distillate demand response in the Northeast (Figure 2).

The cold and substantial snowfall also disrupted the petroleum supply chain. The formation of ice in harbors and rivers complicated delivery of petroleum products to distribution terminals throughout the region. Meanwhile, some Northeast refineries also curtailed crude runs and reduced production of gasoline and distillate as cold interfered with operations.

The increased demand for distillate combined with the supply-chain disruptions caused the New York Harbor (NYH)

Distillate demand for power generation also increased significantly in the Northeast this winter. The region is one of the few areas of the country that continues to rely on petroleum-based products for power generation, albeit typically for short periods of time when the electric generation system is severely stressed. About 30% of the electric generating capacity in New York and New England can APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

45

switch between natural gas and oil products and an additional 9% of capacity in the region is strictly oil-fired.

As the cold weather increased demand for natural gas for space heating, the natural gas supply infrastructure reached its limits and could not provide enough natural gas to meet overall demand, which also includes commercial, industrial, and power generation uses. When natural gas supplies are insufficient to meet demand, supply to so-called ‘interruptible’ customers can be curtailed, increasing natural gas available to residential customers and increasing distillate demand from those customers interrupted, which are mostly industrial customers and electric power generators. In addition, as natural gas demand increased, prices for natural gas spiked higher than distillate fuel (Figure 3), spurring voluntary fuel switching that further increased consumption of distillate for power generation by fuel-switchable and petroleum-only power generating units, which generally make decisions about the dispatch of electric generation units based on variable operating costs. This winter’s cold weather also disrupted distillate supply and distribution networks in the Northeast. Boston and New York Harbors, along with other major waterways such as the Hudson and Delaware rivers, froze, complicating marine deliveries of petroleum products to distribution terminals. New England has no local refineries and most supplies enter the region through the ports of Boston, Massachusetts; Portland, Maine; and Providence, Rhode Island.

In addition, New York Harbor also receives significant volumes of petroleum products via marine deliveries.

The logistical challenges in resupplying distillate to storage terminals combined with increased distillate demand for heating and power generation caused distillate inventories in the Northeast to decline by 8 million barrels (31%) between January 23 and February 27. As of February 27, distillate inventories in the Northeast (PADD 1A and PADD 1B) had fallen to 18 million barrels, the bottom of the five-year range (Figure 4). However, the Northeast is part of the actively traded Atlantic Basin petroleum market and, as is typically the case in 46

the winter, imports increased to meet demand and barrels from Canada, Europe, and Russia resupplied the region. The most recent inventory data as of March 18 show distillate stocks have stabilized. Natural gas customers with interruptible service are no longer being curtailed by constrained pipelines, reducing their demand for distillate fuel, and natural gas prices have fallen back below distillate prices, eliminating the market incentive for switching to distillate. Recent weather forecasts also suggest the harsh winter weather is ending.

As temperatures continue to moderate, the distillate supply situation in the Northeast should continue to improve.

U.S. AVERAGE GASOLINE AND DIESEL PRICES DECREASE

The U.S. average retail price for regular gasoline decreased three cents from last week, to $2.45 per gallon as of March 16, 2015, $1.09 per gallon lower than the same time last year.

The only increase in price occurred in the Rocky Mountain region, up six cents to $2.29 per gallon. The West Coast price was down seven cents, to $3.12 per gallon. The Midwest price decreased five cents to $2.29 per gallon. The East Coast price fell two cents to $2.40 per gallon, and the Gulf Coast price was down a penny to $2.22 per gallon. The U.S. average price for diesel fuel decreased three cents from the week prior to $2.92 per gallon, down $1.09 per gallon from the same time last year. The Midwest, Gulf Coast, and West Coast prices each fell three cents to $2.82 per gallon, $2.76 per gallon, and $3.06 per gallon, respectively. The East Coast price decreased two cents to $3.08 per gallon. The Rocky Mountain price increased one cent, to $2.81 per gallon.

PROPANE INVENTORIES GAIN U.S. propane stocks increased by 0.5 million barrels last week to 54.3 million barrels as of March 13, 2015, 28.0 million barrels (106.9%) higher than a year ago. Gulf Coast inventories increased by 1.3 million barrels and East Coast inventories increased by 0.1 million barrels. Midwest inventories decreased by 0.8 million barrels, while Rocky Mountain/West Coast inventories were unchanged. Propylene non-fuel-use inventories represented 8.5% of total propane inventories.

PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | APRIL 2015

APRIL 2015 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE

47