FREE
VOLUME 2 NO. 2
FEBRUARY 2014
www.PBEMag.com
Andrews Small Town, Big Future 8 16
TCEQ
continues to monitor air and water amidst local, statewide growth
VALENTINE’S DAY last minute planning tips
ADVICE for Mineral Owners from a Permian Basin 22 Land Girl Top 10 Valentine’s Day
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• U.S. RIG COUNT • TOP 35 Drillers & Operators
Industry Data
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News
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Events
Gift Ideas for Her |
Auctions
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Calendar
TransCanada Opens Gulf Coast Line, 24 Breaking U.S. Oil Bottleneck |
Travel
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Tips
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Energy
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Tech
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FEBRUARY 2014
contents
Pbe Features 8
Andrews - Small Town, Big Future
8
16 TCEQ Continues to Monitor Air and Water Amidst Local, Statewide Growth 22 Advice for Mineral Owners from a Permian Basin Land Girl
Other Editorials
12 Top 10 Valentine’s Day Gift Ideas for Her
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15 Calendar of Events 20 Conferences in February - March 21 Upcoming Auctions 24 TransCanada Opens Gulf Coast Line, Breaking U.S. Oil Bottleneck 28 Safety Tips 31 Skilled Worker Shortage Looms for U.S. Construction Firms 32 Festivals and Events in Texas 34 PBE Cares - Bush Tennis Center Serves up Tennis to Youth and Adults 36 Tech Bites - Google’s Smart Contact Lens: What it does and how it works 38 PBE News Briefs: Basin, Offshore, State, Nation, World, Shale & Government 42 Restaurant Bites - Valentine’s Day - Last Minute Planning Tips 44 PBE Inspires - The Bulldog of Burgundy 46 By The Numbers: Texas Rig Count, Top Drillers, Top Operators 49 This Month in Petroleum 4
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
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LETTER FROM
THE EDITOR “In order to succeed, your desire for success should be greater than your fear of failure.” - Bill Cosby
With the holiday season past us, 2014 is in full swing and those involved in the oil and gas industry are as busy as ever. In this month’s issue of PBE, we’ve covered a wide variety of business transactions that have many on their toes already this year. From the booming businesses here in the Basin to the growing pains being felt by Andrews residents as their city emerges into the national spotlight, locals have hit the ground running as they are hoping this new year promises to be even more promising than the last. You’ll read about the long awaited pipeline running from Canada to Houston finally being put into operation and the excitement and struggle that now lies ahead. As you read through this month’s news briefs section you’ll also get an update on many national and worldwide happenings in the industry, many of which have a direct line back to West Texas. Being the month of February, we would be remiss if we didn’t include some Valentine’s Day gift ideas and dinner tips to ensure our readers are well prepared for the big day. Finally, with so much focus on making our ladies happy during this month, Pastor Daniel Stephens gives an insightful message reinforcing the old adage, behind every great man, there stands a great woman. Hopefully you had plenty of time to catch some rest and relaxation this holiday season because all signs point to a busy and prosperous year ahead for many of us living deep in the heart of the oil patch.
Carlos Madrid Editor in Chief/Publisher sales@pbemag.com
/PBENERGYMAG @PBENERGY
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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EDITORIAL CONTRIBUTORS PBE MAGAZINE CONTACTS VOLUME 2 NO. 2
EDITOR IN CHIEF/PUBLISHER Carlos Madrid sales@pbemag.com 432. 559. 5886
AUDRIE PALMER FREELANCE WRITER Midland, TX
ART DIRECTOR/LAYOUT & GRAPHICS Luke Pawliszyn Lukasz Design Studio West Hollywood, CA luke@lukaszdesign.com
audrierpalmer@gmail.com
ADVERTISING For advertising info call 432. 559. 5886 or email sales@pbemag.com ACCOUNT EXECUTIVE Tiffany Clemons tiffany@pbemag.com 432. 978. 2393
DANIEL STEPHENS SENIOR PASTOR Mid-Cities Community Church Midland, TX
SUBMISSIONS Submit story ideas & other news to haley@pbemag.com
daniel.stephens@midcities.org
Tiffany Hokett
PUBLISHED BY: PBE Magazine, LLC. Permian Basin Energy Magazine 4500 Erie Drive Midland, TX 79703 Main Phone: 432. 559. 5886
Vice President American Safety Services, Inc.
Joseph Basco www.PBEMag.com
/PBENERGYMAG
@PBENERGY
Copyright © 2014 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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FREELANCE WRITER josephfbasco@gmail.com
Kimberly Smith CEO Development Resources, Inc.
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How one local community is benefiting from the boom by Audrie Palmer
The oil and gas industry has not only boomed the economy of one West Texas town but has also had a positive effect on the quality of life for the community. In the past decade, the city of Andrews has re-invested almost $100 million back into the community as one benefit from the oil boom. Andrews, with a population of 16,117, was listed last year by CNN Money as one of the fastest growing boom towns in the country with a one-year growth of 4.6 percent. The oilfields are producing 20 percent more oil than they were three years ago, making energy the number one industry for the town. So it’s no surprise that the town is looking to better itself and the community for its residents. This year, the Andrews Economic Development Corporation opened Energy Business Park, a 190-acre business park that, according to AEDC director Wesley Burnett, is already 35 to 40 percent committed and/ or developed. The first business, Mustang Well Services, is set to open this month after water and sewer, cable, electricity and phone lines were installed in January. The new park offers build-to-suit programs and free land may be available for businesses qualifying with a focus in the energy market, authorities said. 8
The city has also completed $3 million in airport renovations, a $12.5 million 13-mile reliever route around the city that opened in October, a new $2 million fire station and is working on a $60 million hospital expansion. “We’re trying to continue to be successful with energy and recruitment. We’ve worked hard to expand it and this year, we will work on more of the same but build on it and make it better,” Burnett said. With the population steadily growing, Burnett said they’ve been able to add jobs and see more growth in the retail businesses along with the energy businesses. One of the major retailers that opened in 2013 was a Love’s Travel Center that also brought with it a McDonald’s restaurant, the first in Andrews, but certainly not the last restaurant to open it’s doors last year. Domino’s Pizza opened in October and broke national sales records for the franchise. The Wall Street Journal
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
reported the restaurant sold $76,076 in food sales during its first week of business. McAlisters Deli opened at the end of January with talks of other restaurants and retailers moving to the area soon. Andrews City Manager Glen Hackler said that he anticipates in the next 12 to 24 months an avalanche of new restaurants, including more chains and franchises, to take notice of the town and move to the area.
existing buildings with about 45 businesses taking part in the transformation and public improvement project. “Even with this growth, we still look like a tired West Texas oil town,” he said.
“When the word gets out of how successful they are, we’re truly going to start seeing a snowball effect,” he said.
An with the rehabilitation program for the infrastructures, it’s certainly begin to take effect and make the businesses look more modern. An engineering firm in 2002 took a photo survey of the main streets of the town, and Hackler said, thumbing through that today compared to the recent changes, one can see how stunning and cleaner of a look the town has undergone.
Hackler said the city has had visits from site selection representatives and key discussions with Wal-Mart, who are actively looking to expand in West Texas and possibly opening a store in Andrews but nothing has been solidified yet.
It’s certainly helped in the draw of several out-of town and state investors, Hackler said, adding that a developer from Colorado has expressed interest because of the transformation and has looked at surrounding towns but is complimentary of Andrews’ amenities.
Waste Control Specialists, one of the larger businesses in Andrews, was awarded a contract recently for uranium processing residues and has undergone a facility expansion to accommodate. The AEDC said the business is working on securing a license and may add up to 100 new jobs because of the increase.
“We want to become more than an oil boom. Oil and gas is so incredible right now, but, as a city, we don’t want to miss the opportunity to enhance the quality of life here for those who will live here long term,” he said. The small town amenities has also had a draw for employees, Burnett said, with many wanting to move and to live in Andrews because of the good schools, low crime rates and the small-town feel.
Burnett said he’s also Many energy and heard rumors oil businesses But one challenge, he added, has been in the way of have located housing and added the AEDC employs a of Wal-Mart or re-located to workforce coordinator that tries to Andrews, Hackler make sure there are employees but nothing said, in the past few for new businesses as well definite. “(The economy) years. The boom has as accommodating during helped to generate more a housing shortage. is definitely the revenue for the city including best it’s been an increase of 10 times in the hotel/ motel Hackler agreed that tax since 2007 and Andrews sales tax housing is one area in a long time revenues have tripled since 2005. that the city is lacking and I hope it in. While they are While the town did lose about 15 percent building 10 to 15 times continues,” he of its population after the last bust between the number of homes in 1980 and 1990 and again suffered a population the area since 2005, they said. loss between 1990 and 2000, Hackler said the trend has been a reversal now of that with new hotels, retailers and businesses setting records.
The city has even helped with the growth by offering an incentive program to help enhance the infrastructures of
are still stretched city-wide on rental housing units.
There is one new apartment complex in town, making this one area that the key ingredient hasn’t been addressed satisfactory, he said.
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Opening the $12.5 million reliever route on October 9 was one of the immediate goals set forth by the city council in 2007 after a community survey expressed an interest in diverting the major truck traffic around the city. That new ring around the city, with an additional one to one and one-half miles of land, is now available for new development and opened an opportunity that didn’t exist before. Hackler added that the route can support a total population outside the loop up to 35,000 and 38,000. Hackler added the area is one of the largest oil producing counties in the state and with that and the strong oil and gas companies and presence, the city will continue to keep up and invest in the community’s quality of life. “The challenge is to stay on top and don’t lose our edge,” he said. The city has made multiple state and national lists in the last few years for its growth and boom, and Hackler said some of Andrews’ core values like strong schools, faith, community, being good stewards with public funds and being proactive will propel it to have an extraordinary future.
“We have all the ingredients in place to be the premier small town not just in West Texas but in Texas,” he said. “And that’s our goal.”
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PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
King’s Point Cove, the newest addition to a 1,400 acre, master-planned gated community nestled on the south west shores of Lake Brownwood, in the gateway to the Texas Hill Country. Full ownership home sites with sensible restrictions, an array of resort-style amenities, and outdoor activities to enjoy with family and friends are currently available for preview.
Call Now To Schedule Your Visit: 1-855-KPC-LOTS KingsPointCove.com Facebook.com/KingsPointCove
OR OR
Golfer’s Delight Gift Option: A Complete Set of Wilson Irons Or Taylor Made R-1 Driver, Plus 2 Rounds of Golf (Cart Included) 1 Night at The Hampton Inn
Stay & Play Gift Option: 2 Nights at The Hampton Inn 2 Rounds of Golf (Cart Included) $150 $50 Chili’s Gift Card
His & Her Gift Option: Taylor Made Corza Ghost Putter Or RBZ Stage 2 Driver, Plus Android Internet Tablet 2 Rounds of Golf (Cart Included) 1 Night at The Hampton Inn
Obtain the Property Report required by Federal law and read it before signing anything. No Federal agency has judged the merits or value, if any, of this property. There is no obligation to purchase anything. Must meet qualifications to receive gifts.
Good For: One Free Round Of Golf (Cart Included) at The Hideout Golf Club 6680 FM 2632 Brownwood, TX 76801 325.784.4653 www.thehideoutgolfclub.com exp. 06/15/14
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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TOP
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VALE GIFT
Chocolates and flowers are great but this year give something that’s more practical and used often, I guarantee she will love you for it! Crosley Record Player
With vinyl discs now widely available again, there’s no better way than to listen to her favorite music — whether it’s Billie Holiday or Arcade Fire — than with the warm sound of a record player. Crosley’s retro version, available in a number of pop-y colors, also doubles as great home accessory. And, unlike its contemporaries, Crosley’s player is light and portable, taking the form of a small suitcase. $99.99 at RadioShack
Sugar Tinted Lip Treatment
If you were to look through an it-girl’s bag, you’d probably find Fresh Sugar’s tinted lip treatment in it. It nourishes her lips during the harsh winter season and protects them from the sun during the summer. It will also give her lips that subtle red tint that will drive you nuts. $22.50 at Sephora
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Jawbone Mini Jambox
Jawbone has designed some of the finest-looking gadgets out there. The Mini Jambox is the newest version of their popular Bluetooth speaker, and is so small it fits in a back pocket — ideal for the music lover who’s on-the-go. It also comes in a wider range of colors and even patterns, including gold! And according to famous photographer Juergen Teller’s campaign for the company, the Jambox mini is even a great bathtub accessory. $149.33 at Amazon
Timex Easy Reader
It’s Timex’s simplicity and modern take on vintage military watches that set them apart in the affordable-watch market. She’ll be able to slip this one on everyday and wear it with classier attire thanks to the red patent leather bracelet. $65 at Nordstrom
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
NTINE’S DAY IDEAS for HER Source: www.askmen.com
Nike Roshe Run Suede
It’s fair to say that Nike nails it every time. The Roshe Run sneaker is no exception and comes in a wide range of unique colorways. The newest addition to the popular sneaker’s roster is a suede rendition available in two colors. Usually sporting a breathy nylon upper, the suede Roshe is a great pick for the colder months — and will kill it in the style department, whether she feels like dressing it up or down. $79 on Amazon
Carrera Mirrored Sunglasses
Another piece that is bound get her on all the street-style blogs are Carrera’s mirrored sunglasses. A modern (and retro — think ‘80s) twist on the Wayfarer shape, the sunglasses come in a range of colorways that are sure to make her stand out in the fashion department, as they’ve done on all the leading ladies wearing them — including top model Cara Delevingne. $125.00 at The Bay
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Nike Print Leggings
Working out is fun, but workout gear itself is often no more than stretchy clothes offered in pink, black or grey. Nike’s line of tights brings the ordeal to whole new level. Their fun mix of patterns and colors will also make her get-up — workout or not — worthy of a street-style blog appearance. $120 on the Nike Store
Sperry Topsider Belt
Valentine’s Day gifts, although smaller than, say, birthday or Christmas gifts, often go a long way. This is true of Sperry’s Topsider belt — a great accessory that she’ll want to wear with everything from her favorite pair of jeans to her favorite dress. $38 at Nordstrom
Jawbone UP
There are a lot of activity trackers out there, but Jawbone’s rendition brings a lot more to the table than most of its competitors. By helping her understand some of her most basic and most important functions — like sleeping and moving — UP helps her develop smart and efficient health habits that will have her at her very best as she takes the New Year on in stride. $121.16 at Amazon
A New Camera
It’s not only guys who appreciate a good gadget these days. Many women admit that they prefer the geeky items over chocolate and perfumes. A star of the 2013 Consumer Electronics Show, the new Samsung Galaxy Camera is the lovechild of a traditional point-and-shoot and a smartphone. It combines photo-snapping hardware with Android 4.1 Jelly Bean, a 4.8-inch HD LCD screen and AT&T 4G for shooting, watching, editing and sharing photos and video. It makes photography more social and seamless. $449.99 at Samsung.com
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polos
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business cards
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flashlights knives
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Promotional Products • TV/Video Production • Graphic Design • Photography
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OBSERVANCES AND CELEBRATIONS
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FEBRUARY 2014
Birthstone: Amethyst Flower: Violet National: Chocolate Lover’s Month Midessa Boat, RV, Sport & Gun Show Black History Month 2014 MODEL BOATS, 5TH WHEELS, TRAVEL TRAILERS, MOTOR HOMES, Dental Month WATER CRAFT, ATVS, GUNS, RESORTS, FISHING & HUNTING GUIDES, JEWELRY, American Heart Month MISC EXHIBITORS, LIVE FISHING TECHNIQUE DEMONSTRATION. Cherry & Grapefruit Month Ector County Coliseum, 4201 Andrews Hwy. Odessa, Texas 79762
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The Annual “King Of The Hill” Poker Tournament
All proceeds to benefit the Historic White-Pool House Museum. The White-Pool House Barn, 112 E. Murphy, Odessa, TX 79761. To Reserve a seat, call Manual Gonzalez at 432-559-8858
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Winter Olympics ( Sochi, Russia) Opening Ceremony
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Boy Scout Day Lincoln’s Birthday
Make a Friend Day
Presidents’ Day is observed on the 3rd Monday in February to honor Washington’s Birthday, the first U.S. President and Abraham Lincoln and other US Presidents.
2014 Excellence In Teaching & Unsung Hero Awards Presented by the Midland Chamber of Commerce, HEB & Abell-Hanger Foundation. 105 N. Main St., 5-7 PM. www.visitmidlandtexas.com
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Presidents’ Day
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Random Acts of Kindness Day
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Valentine’s Day
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Washington’s Birthday Tennis Day
MARCH 2014
Ash Wednesday
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Birthstone: Aquamarine Flower: Jonquil
St. Patrick’s Day
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SPRING EQUINOX
International Earth Day
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FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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TCEQ continues to
monitor
air and water amidst local, statewide growth by Joseph Basco
It is no secret that Texas, not just the Midland and Odessa area, is experiencing unprecedented growth. “Our burgeoning population and booming business base are testament to a can-do spirit that thrives in every region,” said Terry Clawson, spokesperson for The Texas Commission on Environmental Quality. “At the same time, the state’s growth streak presents major challenges.” TCEQ, operating on a $379 million budget in fiscal year 2014, focuses on keeping air and water clean statewide as more vehicles emitting pollution enter the state and the life sustaining resource becomes scarce. In 2011, the TCEQ sent out penalties that equated to $12.5 million. In 2012, the amount decreased slightly to $11.4 million, according to the TCEQ’s biennial report to the state’s 83rd legislature. During these two years, the state began experiencing water drought that continues to this day. The TCEQ has contacted local agencies since then, providing them the groundwork for drought implementation plans. The agency has also tracked public drinking water systems under voluntary and involuntary water use restrictions, and tracks and manages water-right draws of surface water. As of January 21, the majority of the state continues to feel surface water shortages due to the drought. In particular, parts of North Texas are undergoing “exceptional” drought, the highest of five categories. In 16
the Midland and Odessa area, the drought is considered “severe”, which is the third category. “New homes and schools need a reliable water supply, as do existing and expanding industry and agricultural interests,” Clawson said. Air, on the other hand, is an issue the TCEQ has less to worry about. From 2000 to 2012, ozone levels in Texas have decreased 23 percent, according to the TCEQ website. “As far as air near oil and gas production areas, we’re not aware of any regional issues,” Clawson said. “While improperly operated facilities can result in temporary, local, unauthorized emissions, there are no indications that these emissions are of sufficient concentration or duration to harm residents.” While state agencies such as the Texas Department of Transportation and Texas Railroad Commission have obvious importance to the Midessa area as oil fuels the
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
“New homes and schools need a reliable water supply, as do existing and expanding industry and agricultural interests” economy and attracts thousands of people nationwide, the TCEQ also plays a significant role locally because of a water emergency. In 2011, chromium was detected in private water wells near County Road 112 in South Midland. The chromium stretched one mile from the well site, prompting the TCEQ to investigate first. The problem became so significant that the Environmental Protection Agency took over the investigation as a Federal Superfund Site. For now, while the EPA plans to release a report later this year, the TCEQ continues to work on the site as an assistant to the EPA. Clawson said they oversee the filtration systems installed on some residents’ water supply in the area. TCEQ is also the agency that approves major local projects such as the ClearWater Ranch water pipeline. The City of Midland and the Midland County Fresh Water Supply District have teamed up to address long-term water needs by creating water pipelines several counties away.
ClearWater Ranch, located in Winkler County, may provide Midlanders with years of water by connecting one pipeline to the already existing T-Bar Ranch water pipeline, which then reaches Midland County. TCEQ has to approve several components of the project before the pipeline can be built, from design plans to financial plans. The agency continues to respond to current day issues statewide, whether it is the West, Texas fertilizer plant explosion cleanup, or its continuance of issuing penalties, such as ones totaling $910,673 against Gulf Chemical and Metallurgical Corp. on Jan. 15. “Protecting human health and natural resources in Texas is a responsibility that grows more complex,” Clawson said. “The Texas Commission on Environmental Quality has shown the ability to meet this challenge. “
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Conferences in FEB. - MARCH 2014 Arctic Technology Conference 02/10/2014 - 02/12/2014 Houston TX, USA www.arctictechnologyconference.org
Global Infrastructure Leadership Forum 02/26/2014 - 02/28/2014 New York City NY, USA www.cg-la.com/forums
International Pipeline Pigging and Integrity Management Conference and Exhibition 02/10/2014 - 02/13/2014 Houston TX, USA www.clarion.org/ppim/ppim14/index.php
PESA Supply Chain Seminar 02/27/2014 - 02/27/2014 Houston TX, USA www.pesa.org/index.php/page/c/upcoming-events/P4
ARC Industry Forum 02/10/2014 - 02/13/2014 Orlando FL, USA www.arcweb.com/events/arc-industry-forum-orlando
PowerTest 2014 03/03/2014 - 03/06/2014 Denver CO, USA http://www.powertest.org/
OGIS Florida 02/12/2014 - 02/12/2014 Fort Lauderdale FL, USA www.ipaa.org/meetings-events/event-details/?mid=300
World Heavy Oil Congress 03/03/2014 - 03/06/2014 New Orleans LA, USA www.digitalrefining.com/57,events,World_Heavy_Oil_ Congress.html
Numerical Modeling in Unconventional Reservoirs Forum 02/23/2014 - 02/28/2014 Newport Beach CA, USA www.spe.org/events/calendar
IHS CERAWEEK Energy Conference 03/03/2014 - 03/07/2014 Houston TX, USA www.ceraweek.com/2014/
International Polyolefins Conference 02/23/2014 - 02/26/2014 Houston TX, USA www.spe-stx.org/conference.php
Subsea Tieback Forum & Exhibition 03/04/2014 - 03/06/2014 San Antonio TX, USA www.subseatiebackforum.com/index.html
Oil and Gas Communication Technology Summit 02/24/2014 - 02/26/2014 Houston TX, USA www.oilgascommunicationtechnology.com
IADC/SPE Drilling Conference and Exhibition 03/04/2014 - 03/06/2014 Fort Worth TX, USA www.iadc.org/events
Oil and Gas Communication Technology Event 02/25/2014 - 02/26/2014 Houston TX, USA www.oilgascommunicationtechnology.com
Exploration and Production Technology Summit 03/10/2014 - 03/11/2014 Houston TX, USA www.exproevent.com/ AIChE Annual Midwest Regional Conference 03/10/2014 - 03/11/2014 Chicago IL, USA www.aiche.org/conferences/midwest-regionalconference/2014 ACS Chemistry and Materials for Energy 03/16/2014 - 03/20/2014 Dallas TX, USA www.acs.org/content/acs/en.html
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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
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SOUTHCENTRAL AUCTIONS
COMPANY
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HUGE OILFIELD EQUIPMENT AUCTION
Machinery Auctioneers of Texas
March 3, 2014
Odessa, TX
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Kruse Energy & Equipment LLC
March 4, 2014 March 5, 2014
Oklahoma City, OK
FISHING & RENTAL TOOLS WELL SERVICE RIGS - RELATED EQUIPMENT
Kruse Energy & Equipment LLC
April 30, 2014
Fairfield, TX
INVENTORY
INTERNET AUCTIONS
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PIPE & EQUIPMENT AUCTION
Network International Inc
Feb 5, 2014
Internet
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FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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ADVICE for Mineral Owners
from a Permian Basin Land Girl Every day, landgirls and landmen visit various rural abstract offices & courthouses “checking records” for mineral owners, oil companies or family estates. Daily, several hundred Midland based landmanagers travel to remote towns around the Permian Basin. Many days, I enjoy the people and local dining at family run restaurants, across from the courthouse. Today, I had some fried catfish and grilled vegetables at Grandma’s Kitchen. Everyday is a new city, a new courthouse, and a new adventure. While on the road, I wanted to stop and share some advice with PBE magazine readers. As landmanagers, we often find that individual oil and gas mineral and royalty owners make simple mistakes with their oil and gas properties. Individuals often believe an oral recollection of family history. Some mineral owners think that granddaddy left a mineral interest to them, or perhaps their cousins, and the grandkids. They think they own an interest, but are not sure how or why. They reflect on family reunions or Christmas holidays and recall the family discussion about the “minerals.” The most important advice is to NOT rely on your recollection of family stories, but rely on record title. We have had many clients who were not clear why they owned an interest or where it was filed of record. If landmanagers had a mantra, it might be, “In Record Title, WE TRUST!”
estate. When individuals or families attempt to save money, they can leave the next generation in a difficult position. Oil and Gas properties are important assets no matter the size or location of the interest.
TIP 1: So take time to dig out the shoe box under your bed or in your closet with your mineral or royalty information. Next, take time to hire a landgirl/landman or an oil and gas attorney to inventory your estate. Work with professionals to gather information on what granddaddy or grandmother really gave the family. Estate planning attorneys can also help you confirm your mineral or royalty interest.
Stay tuned for more tips in upcoming issues of PBE Magazine!
Some mineral owners think that if they save money and avoid working with a landman, an oil and gas attorney or an estate planner that they are making a wise decision. Be sure you are well advised by professionals as you manage your 22
In addition, some mineral owners may believe, “oh, that is just a small interest, so I won’t really mess with it.” Many landmen and landgirls have seen the smallest interest yield incredible financial results. So every interest is important! In addition, there are still minerals, royalties, open leases and producing properties in the Permian. If you want to become an investor, it IS possible.
Development Resources, Inc. likes to provide solid advice about mineral management. Visit us at www.permianlandgirl.org for answers to your questions, mineral inventory or on twitter @permianlandgirl
Refer to the PBE magazine and we will answer your questions without a fee. Kimberly Smith, CEO Development Resources, Inc.
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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T rans C anada
opens Gulf Coast line, breaking U.S. oil bottleneck CALGARY, Alberta - In late January, TransCanada Corp began delivering crude through a major new pipeline from Oklahoma to the Gulf Coast, commissioning a $2.3 billion project expected to help eliminate a bottleneck that has warped the U.S. oil market for three years. For company officials, the launch of the 700,000-barrelper-day conduit -- originally conceived as the southern leg of the contentious Keystone XL line from Canada -was a chance to claim a milestone in the drive toward reducing U.S. reliance on foreign oil, hailing the project for delivering cheaper crude to Gulf refiners and creating thousands of U.S. jobs. For oil traders, the line from the bloated Cushing crude oil storage hub to the cluster of refineries on the Gulf Coast of Texas is a major step toward erasing the yawning gap between depressed inland domestic crude oil prices and the much higher global prices paid on the coast. Above all, it was an opportunity to vent TransCanada’s mounting frustration over its main Keystone XL line, which, more than five years after the initial filing, is still awaiting a final decision from the Obama Administration. “As we bring Gulf Coast into operation, again showing people this isn’t an export pipeline and (will be) operated safely, that should provide the base underpinning and evidence that Keystone XL is at the end of the day just another piece of energy infrastructure,” Russ Girling, TransCanada’s chief executive, told reporters. “It is just a pipeline and it can be built and operated safely.”
REFINERS’ REJOICE
In practical terms, the start-up of the Gulf Coast Project will give Canada’s oil sands producers their first largescale access to the refining hub on Texas’ Gulf Coast. Only one other major line -- the 400,000 bpd Seaway 24
-- runs from Cushing to the Gulf, and it has been pumping at well below capacity. TransCanada said its pipeline will initially ship 300,000 bpd, rising as the company tests its new system. Alex Pourbaix, president of the company’s pipeline division, said he expects that shipments will average 520,000 bpd over 2014. The company has already begun construction of a lateral line to Houston that is expected to be in service later this year. When the lateral is complete, TransCanada will be able to boost the capacity of the Gulf Coast line to 830,000 bpd. The line should eventually help lower stocks at Cushing, the pricing point for the New York Mercantile Exchange’s West Texas Intermediate (WTI) contract, North America’s benchmark oil price. A surplus of crude at the storage hub has depressed U.S. oil prices, with WTI trading well below crudes priced on the European Brent benchmark. It may also help alleviate steep discounts on Canadian crude, which dropped to more than $40 per barrel below the WTI benchmark in November. “It should strengthen WTI a little bit because it will further relieve the bottleneck in getting crude from Cushing, Oklahoma, to the U.S. Gulf Coast,” said Patricia Mohr, commodity market specialist at Scotiabank.
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
KEYSTONE SPARRING
Meanwhile TransCanada and environmental groups continue to spar over the line’s safety and whether the crude will be destined for export markets. In theory, if certain conditions are met, shippers could seek permission to export Canadian crude oil via Gulf Coast ports, experts say. “President Obama made the wrong decision to fast-track this export pipeline and citizens will keep TransCanada accountable for every leak, spill and tragedy on families’ land and water,” Jane Kleeb, executive director of Bold Nebraska, said in a statement.
largest U.S. refiner, said. “There’s just such a market demand for it, it’s going to get here one way or the other.” Valero is also among the Gulf Coast refiners seeking to increase access to Canadian crude via rail. The company plans to start up a Canadian crude offloading facility at its 205,000 bpd St. Charles refinery in Norco, Louisiana, in the first quarter this year and is considering a similar project at its 290,000 bpd refinery in Port Arthur, Texas Source: Reuters, Scott Haggett and Nia Williams
And once Canadian pipeline giant Enbridge Inc starts up its 600,000 bpd Flanagan South pipeline later this year, more heavy Canadian crude will flow into Cushing and down to the largest U.S. refining hub along the Gulf Coast, where refineries are largely configured to run heavy oil. “It shows that with or without Keystone XL’s northern leg, Gulf Coast refineries will be processing heavy Canadian crude,” Bill Day, spokesman for Valero Energy Corp, the
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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THE WELLS IN MIDLAND/ODESSA ARE ABOUT TO GET
A NEW SHADE OF CANARY YELLOW
WELLHEADS 26
FRAC EQUIPMENT
PRODUCTION SERVICES
432.563.1970 PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com CANARYUSA.COM | FEBRUARY 2014
MANUFACTURING
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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SAFETY TIPS Is your PPE
(Personal Protective Equipment) protecting you as it should? Personal protective equipment or PPE is an industry standard in the oil patch. For most oil industry workers, items such as hard hats, safety glasses and gas detection monitors are part of their everyday uniform. Not only do companies and employers require workers to wear certain types of protective equipment, most PPE has specific regulations regarding usage and product standards established by organizations such as OSHA (Occupational Safety and Health Administration) and ANSI (American National Standards Institute). Each product is manufactured to meet certain standards set by these organizations. In addition to manufacturing standards, many products require additional monthly inspections in order to maintain the original production standards and therefore function as the safety equipment was intended. If you are unaware of the maintenance inspections, manufacturer dates and industry standards pertaining to specific equipment, then you may be putting yourself at risk and not be as protected as you think. Hard hats are essential in the oil industry and provide protection from falling debris, heavy duty equipment and elements found in working in harsh environments. In the event of an accident, wearing a hard hat can be the difference in life or death. But how do you know if your hard hat is in compliance or functioning properly? Although there are many factors that affect whether or not a hard hat is still functioning properly there are a three main points that can help determine if a replacement hard hat is necessary; manufacturers date, date of service and wear and tear. First, each hat is stamped with a manufacturers date. This date indicates when the hat was molded and does not indicate the service life of the hat. The service date as outlined by MSA, a leading manufacturer of hard hats, recommends the hard hat shell be replaced every 5 years after being placed into service. MSA also recommends that the suspensions inside of the hard hat be replaced every 12 months. Finally, hard hats should be replaced when wear and damage to the hard hat are noticed during regular inspections. Examples of extreme wear and tear that warrant immediate replacement are hard hats that have been exposed to extreme fluctuations in weather conditions, chemical exposure, and impact or penetration. If you are unsure if the hard hat you are wearing is in compliance or should be replaced, seek the advice of a safety professional.
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Eye protection in the form of safety glasses or goggles is also an integral part of any oil industry uniform. Safety glasses offer protection from flying debris, impact to the eye area, chemical exposure and protection from the elements to name a few. Although safety glasses are sold from convenience stores to big box stores, not all eyewear marketed as safety compliant meet the minimal standards. For instance, since 1922 ANSI Z87.1 has established minimal protection standards for safety eyewear by defining basic impact versus high impact protection, lens thickness and coverages as well as required testing and optical properties. If the safety eyewear you are using daily has an appealing style or is sold as approved safety eyewear but does not have an ANSI marking on the lens similar to “Z87+”, you may not be protected. Safety eyewear has come along way over the past several years developing products that meet or exceed the safety requirements and are stylish to wear. Check your safety glasses for ANSI markings, normal wear and tear and be sure what you are wearing offers full eye protection. Gas detection equipment can be job specific but most are common to the overall PPE uniforms worn daily by people working in the oil industry. There are many types of monitors from which to choose depending on the environment and job. Gas monitors can be single gas or multi-gas and “throw away” after a designated time period as noted by the monitor type or a rechargeable/reusable monitor all of which are used to protect workers by monitoring and detecting variances in acceptable air quality levels that may fluctuate in certain environments. Although there are no specific requirements for monitor maintenance, OSHA Bulletin SHIB 05-04-2004 does offer detailed guidelines to maintain proper functioning of gas detection monitors. In order for gas detection equipment to function properly and alert a worker of possible toxic environmental dangers due to changes in safe air quality levels, recommended maintenance suggests the battery must be charged and have power and the monitor must be calibrated every month and the monitor bump tested daily to ensure that the monitor is working properly. The sensors in the monitor must also be tested regularly and verified that they are reading changes in gas levels and therefore functioning properly. Understanding your monitor and how it should be maintained is vital to keeping yourself and others safe when working in environments where air quality may become unstable. Personal protective equipment or PPE is an integral part of keeping workers safe across the oil industry. The equipment that is regulated and required to help keep workers safe in potentially harmful environments is not to be worn daily without thought or maintenance. Each product is carefully designed to offer maximum protection within the guidelines established by the industry for which they are intended. It is the responsibility of every worker to ensure that the integrity of each piece of equipment is in proper working order each and every day for full safety protection. The responsibility of each wearer of PPE includes but is not limited to daily visual inspection, daily product functional testing and general knowledge of what constitutes a true safety product that meets or exceeds all standards and regulations. If you are unsure if your products or equipment are in compliance and keep you or your workers fully protected, please contact a safety professional immediately. Tiffany Hokett Vice President, American Safety Services, Inc.
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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S killed worker shortage looms for U.S. construction firms U.S. construction companies are gearing up to hire more workers this year, if only they can find them. A shortage of skilled workers is looming in the sector, which lost 2.3 million jobs during the 2007-2009 recession and has only recouped less than half a million jobs, catching employers off guard and sowing fear among many. According to an Associated General Contractors of America (AGC) survey released in January, 86 percent of companies plan to start hiring this year, up from 78 percent in 2013. At the same time, 62 percent of firms are already complaining they cannot fill key professional and craft worker positions. The AGC represents 30,000 construction firms throughout the nation. “In particular, many firms report having a hard time finding qualified workers to fill project manager or supervisor positions, equipment operators, carpenters and laborers,” AGC Chief Executive Officer Stephen Sander told reporters. The survey found that two-thirds of companies expect it will either become harder or remain difficult to find qualified construction professionals over the next 12 months. In addition, 74 percent of the firms predict it will get harder, or remain as hard, to find qualified construction craft professionals this year. “One potential reason for growing construction worker shortages is that many contractors have a poor opinion of the local pipeline for preparing new workers,” said Sander. During the Great Recession, construction workers who lost their employment found jobs in sectors such as shale gas exploration, as well as healthcare. Others were lost to retirement.
Sander said competition for the available construction workers was heating up. The survey found that 52 percent of firms reported losing workers to other construction companies. As a result, companies are raising wages and improving benefits to retain workers, the survey found. “The pressures we are having is just keeping the workers in the industry,” said Rob Moore, president and CEO of Big-D Corporation in Salt Lake City. “When the market starts to come up and we start seeing more projects become available, the fear for us is where are the workers going to come from. The skilled workers that have moved into these different market segments, can we get them back into construction?” The shortage of skilled workers is also an issue for manufacturing, which was also hard hit by the recession. Much of the problem is blamed on retiring baby boomers and the fact that construction and manufacturing remain unattractive career paths for most students graduating from high school. Strong growth is expected in construction this year, driven largely by the private sector. Public sector spending on construction is expected to stabilize as belt-tightening in Washington and at both state and local government level eases. Just under three-quarters of firms plan to buy some kind of construction equipment this year, while 86 percent of firms plan to lease new equipment. At the beginning of 2013, only 64 percent of firms planned to purchase new construction equipment, while 77 percent planned to lease new equipment.
Source: Reuters, reporting by Lucia Mutikani
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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FEBRUARY & MARCH
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. The Color of Oil: Paintings by Margarete Bagshaw Ongoing through March 2 Ellen Noël Art Museum 4909 E. University, Odessa, TX 79762 Artist Margarete Bagshaw has been long known for her use of color, composition and texture. Painting in complex compositions that feature a dynamic color palette, her work is instantly recognizable. ROCKPORT’S CLAY EXPO February 1 Rockport The Bountiful Bowl Pottery Fair features 35 potters and great food at the High School Commons. Rockport Center for the Arts, merchants & galleries feature clay art in the Historical District. (361) 729-5352 “Science Sensation” Family Science Night February 6 The Petroleum Museum 6:30pm-8pm, Free Admission Event Contact: Stacie Hanna 432-683-4403 shanna@petroleummuseum.org
The Annual Take Me Fishing Event February 8 Comanche Trail Park - 301 Interstate 20 Odessa, TX 79766 Comanche Trail Park Pond is Saturday, 10am-2pm. There will be free door prizes and lots of fun for all ages. Please bring your own pole, as supplies are limited. Kids Angler Education - TPWD & Odessa Parks representatives will teach the basics of traditional fishing such as tying the hook on to the line, cast a spincasting reel, identify fish and demonstrate how to be a safe and responsible angler. Contests and Games. No Fishing License Required for those under 17 years of age. Camp Fire Family Concert February 9 Yucca Theatre, 201 N. Colorado, Midland, TX 79701 3:30-6:30pm - Camp Fire West Texas Presents Trout Fishing in America Family Concert. Trout Fishing in America is a musical group that has been nominated for four Grammy Awards. Camp Fire West Texas Council is presenting them in concert. “Trout presents music for people who take their fun seriously. Concert tickets will be on sale at N-Tune in Midland and Odessa or at the Camp Fire office for $10.00. Proceeds will go to benefit Camp Fire USA West Texas Council programs in Midland and Odessa. For more information about purchasing tickets contact the Camp Fire office at 432-570-4144 10th ANNUAL RIO GRANDE VALLEY MUSIC FESTIVAL February 11-16 Mercedes
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Country, Bluegrass, Western and Gospel Music. Five stages. Five full days plus Sunday morning Gospel jam. Special Mariachi & Folkloric performances. Livestock Show Grounds. For info call (956) 373-0130 Reserve RV Camping on site at (956) 565-2456 www.rgvmf.com Sandy Anderson as Dolly Parton February 15 The Ector Theatre, 500 N. Texas, Odessa, TX 79761 8pm - The Ector Theatre is home to Tribute Artists and this is one Tribute Artist that is a must see. Sandy Anderson as Dolly Parton is an award-winning artist. Her show will amaze you. Tickets are $28.00 For more information call 432-580-0898 Purchase tickets online at www.ectortheatre.com 19th ANNUAL CELEBRATION OF WHOOPING CRANES & OTHER BIRDS February 20 - 23 Port Aransas A year-round birder’s paradise! This annual festival features guided bus & boat tours, world-renowned speakers, art classes, demonstrations, a nature arts and crafts show and more. (361) 749-5919 (800) 45-COAST www.whoopingcranefestival.org
Shrimpfest 2014! February 24 Ector County Coliseum, Building G 6pm - Benefiting the Ellen Noël Art Museum. Nearly 1,200 pounds of tasty shrimp, along with all the fixings, are served at Building G in the Ector County Coliseum. The evening features a spectacular silent auction, a live auction, and toe-tapping live music. Sponsor tables and general admission tickets with all you can eat and drink are available. 432-550-9696 info@noelartmuseum.org MARDI GRAS OF SOUTH - EAST TEXAS February 27 - 28 and March 1 - 2 Port Arthur A spectacular Mardi Gras event featuring four days of costuming, arts & crafts, parades, carnival, concerts, floats, music, concessions and family entertainment downtown. (409) 721-8717 www.mardigras.portarthur.com Circus Gatti February 28 - March 2 Ector County Coliseum, 4201 Andrews Hwy, Odessa, TX 79762 432-381-3324
28th NORTH TEXAS FARM TOY SHOW February 22 Gainesville Civic Center, 311 S. Weaver 9am-3pm. View, buy, sell, trade farm toys of all kinds trucks, custom toys & other miscellaneous toys & parts. Admission: $2. Contact Ed Pick, 504 CR300, Muenster, TX 76252 (940) 759-2876
2014 Permian Basin Muscle Walk and 5K March 1 Grande Communications Stadium 8:30am - 12pm, To Benefit the Muscular Dystrophy Association www.visitmidlandtexas.com/2014-Permian-BasinMuscle-Walk-and-5K FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Cares
Serves up Tennis to Youth and Adults The West Texas landscape has had major changes in the past few years. With the oil boom comes growth and expansion. If you have traveled in the northwest side of Midland, you may have noticed a new phenomenon in the horizon, the Bush Tennis Center. Bush Tennis Center is a public tennis facility that
offers an array of programs, lessons, clinics and opportunities for everyone to experience the game of tennis. “One of the biggest misconceptions we have faced is many think we are a private facility,” said Executive Director Valerie Acosta. “We are here to serve the public and offer many different programs for the entire population of the Permian Basin.” Bush Tennis Center opened in 2012 as a nonprofit organization aiming to provide everyone the opportunity to experience the game of tennis, regardless of physical, financial or geographical barriers. “Tennis truly is a lifelong sport,” said Director of Tennis Luis Valdez. “However that does not mean you have to have learned it early in life to participate.”
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Bush Tennis Center offers Ready, Set, Rally! for adults learning the game of tennis. They also offer intermediate and advanced clinics for adults. During the same time as the adult lessons, youth programs are also being offered. Balloon Tennis for children three to five years old teaches basic eye-hand coordination, tennis etiquette and beginning tennis techniques. Red Ball, Orange Ball and Green Ball are all offered for youth 10 years old and younger. More advanced youth programs include Junior Development and Select Team. “Many of the youth participating in our Select Team program also participate in their school’s tennis team,” said Tennis Coordinator Armando Morales. “The Select Team program helps take them to the next level. Along with clinics, we also offer a Higher Degree Program and youth tournaments.” In addition to these programs, Bush Tennis Center has also included programs with other organizations throughout the Permian Basin.
Midland Independent School District has been partnering with the parent organization of BTC, Midland Tennis Center, Inc., and BTC co-founder Luis Valdez by offering an afterschool program aimed to help students to get active, build positive character traits and experience the game of tennis that may not have had the opportunity. Other organizations that have partnered with Bush Tennis Center include Big Brothers Big Sisters, Bynum School, Hillcrest School, St. Ann’s Catholic School, High Sky Children’s Ranch and Sherwood Baptist Church.
For more information about the programs offered by Bush Tennis Center, please contact the Bush Tennis Center at 432.620.8180 or visit them on the web at www.bushtenniscenter.com FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Tech
Bites
Source: www.washingtonpost.com
‘s Smart Contact Lens: What it does and how it works Wearable devices are already making technology much more intimate than once seemed possible, but Google has kicked it up to a whole new level. The company has announced a project to make a smart contact lens. But this gadget isn’t going to be used to deliver your e-mail straight into your skull — at least not yet. The project is working to tackle one of the biggest health problems facing the country today: diabetes. Given the public wariness about wearable devices and their capabilities for collecting data, allowing the company to get that close raises the question: How will Google handle this data? Or, for that matter, how can any company stepping into a new world of collecting sensitive medical data deal with the security concerns?
Photo courtesy of www.guardianlv.com
It’s a question that Google officials have clearly thought a lot about, said Joseph Lorenzo Hall, chief technologist at the Center for Democracy & Technology, who was briefed on the lens before the company’s Thursday announcement. Hall said that Google assured him that the data would not be added to the company’s banks of personal information gathered from other services. “The data will never hit Google’s servers,” he said. “That’s a forward-thinking affirmative claim that they’re making. That is important.” The soft contact lens that Google is unveiling — it’s still a prototype — houses a sensor that measures the glucose levels in tears. A tiny pinhole in the lens lets tear fluid seep over the glucose monitor to get regular readings. Right now, the company said, it can get a level reading once every second. The lens also features a tiny antenna, capacitor and controller so that the information gathered from the lens can move from the eye to a device — such as a handheld monitor — where that data can be read and analyzed. It will draw its power from that device and communicate with it using a wireless technology known as RFID. 36
Given the sensitive nature of the data, Hall said, Google has also said it will make sure any data transferred from the lens cannot be manipulated — something that could have potentially fatal consequences if patients inject the wrong amount of insulin. Google has also worked to build in safeguards against other kinds of problems, such as a piece that is similar to a circuit breaker to prevent the lens from overheating. The National Diabetes Education Program estimates that 382
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
developed their own products to embed sensors in the eye to measure these levels, while other companies, such as Freedom Meditech, have explored measuring glucose levels through the eye by using light. Parviz — who once led the Google Glass team — and Otis were colleagues at the University of Washington before moving over to Google’s department for developing “moonshot” projects, Google[x]. The company is still in the early days of the smart contact lens project, but officials said that it is in discussions with the Food and Drug Administration to figure out how to bring the product to market. million people worldwide and 25.8 million Americans have diabetes. That means that every day — multiple times a day — more than 8 percent of people in this country must take time out to prick themselves to test their blood levels. “It’s disruptive, and it’s painful,” Google project co-founders Brian Otis and Babak Parviz said in the blog post. “And, as a result, many people with diabetes check their blood glucose less often than they should.” Physicians and medical researchers have thought about ways to measure glucose through the fluid in the eye for years, but have had trouble figuring out how best to capture and analyze those tears. Some companies, such as EyeSense, have
Hall is excited about the product but said that if the device interacts with apps from other companies, consumers will have to trust their security, too. “One thing I do worry about is mobile security itself. It is a miasma, and the app that’s developed to use with this is probably going to be made by someone else,” he said. “Whoever is making that app will have to answer those questions. But they haven’t been answered yet because we haven’t gotten that far down the line.”
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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PBE NEWS BRIEFS Watching the basin
Jana Partners ups stake in QEP Resources, to nominate candidates to board Activist investor Jana Partners LLC increased its stake in oil producer QEP Resources Inc and said it plans to nominate candidates to the company’s board. Jana, the largest shareholder of QEP, increased its stake to 9.5 percent from 7.6 percent in January. QEP said in December it would spin off its pipeline business after pressure for the activist hedge fund that said the company did not have the expertise to run the unit. Jana said on Monday it would continue to discuss with the board on issues such as separation of QEP Field
Services from the company, the board and management composition and its incentive compensation structure, among other things. In a U.S. regulatory filing, Jana said it might engage in discussions with shareholders and other interested parties regarding nominating director candidates to the company’s board. Under pressure from Jana, the company is looking to transform itself into a pure-play exploration and production company. QEP said in December it would buy oil assets worth $950 million in the Permian Basin. Source: Reuters
Watching Offshore
China to start regular patrols from island in S.China Sea China will base a 5,000-tonne civilian patrol ship on one of the main islands it controls in the disputed South China Sea and begin regular patrols, an official newspaper said in late January, a move likely to add fuel to territorial disputes with neighbors. The China Ocean News, published by the State Oceanic Administration, said the ship would be based on Woody Island, which China calls Sansha city, on the Paracel Islands. China will “gradually establish a regular patrol system on Sansha city to jointly protect the country’s maritime interests”, the report added. It will continue to build infrastructure on the island as well as a “joint platform for sharing maritime security data”, it said. China is in an increasingly angry dispute with its neighbors over claims to parts of the potentially oil and gas-rich South China Sea. China lays claim to almost the whole of the sea, which is criss-crossed by crucial shipping lanes. It upset the Philippines and the United States this month when rules went into force demanding 38
fishing boats seek permission to enter waters under the jurisdiction of China’s southern province of Hainan, an area the provincial government says covers much of the South China Sea. Chinese patrols in the South China Sea are generally conducted by civilian vessels, though China’s navy routinely carries out drills there, including late last year by the country’s first aircraft carrier. The newspaper did not say when the patrols would begin, though said one of their focuses would be on search and rescue operations and the “speedy, orderly and effective emergency response to sudden incidents at sea”. Separately, the Beijing Times newspaper said that China would build the world’s largest maritime surveillance vessel, a 10,000-tonne ship that it said would be larger than an equivalent Japanese ship, currently the world’s largest surveillance vessel. The report did not say when the ship would enter service. Source: Reuters
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
Watching the STATE
Texas State Comptroller’s Monthly Economic Outlook Job growth, sales tax collections and building permits all signal that the Texas economy continues to outpace the national economy. Over the past year, Texas added jobs in all of the 11 major industries, including professional and business services, trade, transportation and utilities, leisure and hospitality, education and health services, construction, mining and logging, government, financial activities, information, other services, and manufacturing. Pre-recession Texas employment peaked at 10,635,700
in August 2008, a level that was surpassed in September 2011, and by November 2013 Texas added an additional 632,100 jobs. In the U.S. as a whole, only 87 percent of recession-hit jobs were recovered by December 2013. Texas and the nation returned to economic growth in 2010 and 2011, respectively. In calendar 2012, Texas real gross domestic product grew by 3.2 percent, compared with 2.2 percent for the U.S. Source: Comptroller Susan Combs www.thetexaseconomy.com
Watching the Nation
Winter Freeze spikes natural gas usage A record-setting bout of bitter cold weather swept down through the Midwest and across most of the country in early January. The Northeast region reacted with upward spikes in wholesale natural gas and power prices as generators and other customers struggled to procure natural gas supplies. In the Mid-Atlantic region, record-high winter peak demand along with unexpected outages of power plants and natural gas equipment drove peak electricity prices even higher than in New York and New England. The sharp rise in Northeast and Mid-Atlantic natural gas and power demand also spurred record-high natural gas storage withdrawals. Day-ahead, on-peak power prices at the Massachusetts Hub went slightly above $200 per megawatthour (MWh) during a brief cold spell in mid-December 2013 and up to $237.75/MWh during the early January freeze. These prices were mainly driven by corresponding movements in natural gas prices as the demand for natural gas for both power and heating led to full use of natural gas pipelines in the region and a scarcity of supply. Prices at the Algonquin Citygate trading point in Massachusetts, which normally remain around $3-$6/MMBtu during unconstrained periods, reached slightly over $30/MMBtu in mid-December 2013 and were up to $38.09/MMBtu in early January.
According to the North American Electric Reliability Corporation’s (NERC’s) annual winter reliability assessment, New England faces essentially the same constrained natural gas supply situation as it did last winter. The Independent System Operator of New England (ISO-NE), the grid operator for New England’s electric system, has implemented a number of shortterm measures to mitigate the effects of fuel supply risks this winter, including a new Winter Reliability Program, which solicited bids from oil-fired, dual-fuel and demand response resources to provide extra capacity to the system. The program requires oil-fired generators to maintain oil inventory on-site and dual-fuel generators to demonstrate timely gas-to-oil switching capability.
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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Watching the WORLD
Morocco ends gasoline, fuel oil subsidies Morocco said in late January it had ended subsidies of gasoline and fuel oil and had started to cut significantly diesel subsidies as part of its drive to repair public finances. But the government, keen to avoid the kind of social unrest that toppled several other North African regimes during the Arab Spring, said it would continue to subsidize wheat, sugar and cooking gas used by poorer Moroccans. The cash-strapped North African kingdom is under pressure from the International Monetary Fund and the World Bank to cut spending and reform subsidies, taxation and its pension system. The demands are linked to a two-year, $6.2 billion precautionary credit line agreed by the IMF in 2012 for Morocco. “Gasoline and fuel oil are no longer among the products subsidized by the government,” the general affairs ministry said in a statement carried by the state news agency MAP. Morocco is the most advanced among North African countries in its reform of public subsidies and already
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started last year to partially index energy prices to international market levels. On Thursday, nearby Tunisia’s outgoing Islamist-led government announced it had suspended planned oil price hikes after a series of protests and strikes over high living costs. Morocco said subsidies for diesel would decline from a level of 2.15 dirhams per litre this month to 0.80 dirham by October. Morocco has budgeted for 30 billion dirhams worth of food and energy subsidies for 2014, down from 42 billion last year and more than 53 billion dirhams in 2012. But the subsidy reductions could hurt the fragile economy, which is heavily reliant on tourism, agriculture and remittances from Moroccans living abroad. Morocco’s main Islamist opposition movement, Justice and Spirituality, urged leftist groups last year to join protests against the subsidy cuts. But so far there has been little sign of widespread public discontent over the measures. Source: Reuters
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
Watching THE SHALE
Saudi’s SABIC expects to enter U.S. shale market this year Saudi Basic Industries (SABIC) is in talks with several U.S. firms to invest in the U.S. shale gas industry, and expects to enter that market this year, chief executive Mohamed al-Mady said on Wednesday. “We’re currently in talks with a few big names in the U.S. for investment in shale gas. We expect to enter the market sometime this year. This will be great for SABIC and will globalize our operations,” he said. Mady, speaking to Reuters on the sidelines of the World Economic Forum in Davos, did not elaborate on the size or type of investment in U.S. shale gas.
Last year Mady said SABIC, one of the world’s biggest petrochemical producers, planned to build a new shale gas cracker in the United States. Any investment would not be heavy in the initial stages, Mady said, adding the company had no urgent funding needs so he doubted it would tap the bond market this year. “We hope our profit will increase next year. There won’t be any significant investment in the coming two to three years. Most of the shale investment will come in 2017.” Source: Reuters
Watching the GOVERNMENT
IEA sees oil use rising as global growth picks up Global oil demand will rise more quickly this year as economic growth in industrialized countries accelerates, absorbing more supply even as U.S. shale oil production reaches record highs, a report stated in January. The International Energy Agency (IEA) said world oil consumption would increase by 1.3 million barrels per day (bpd) in 2014, 50,000 bpd higher than previously forecast. “Global oil demand growth appears to have gradually gained momentum in the last 18 months, driven by economic recovery in the developed world,” the IEA said in its monthly report. “Most OECD economies have by now largely exited the restraints of recession, with strong gains in some countries in the energy-intensive manufacturing and petrochemical sectors.” Oil demand growth has been boosted by a robust economic rebound in the United States, where the IEA has revised up its 2013 demand estimate by 180,000 bpd to 18.9 million bpd. The IEA, which advises most of the largest energy-
consuming countries on energy policy, raised its demand forecast for OPEC oil this year by 200,000 bpd to 29.4 million bpd. The IEA said rising U.S. crude production helped balance the effects of supply disruptions among some OPEC countries. “Most prominent among those shifts was the relentless rise in U.S. crude production, whose 990,000 bpd growth, one of the largest annual gains on record for any country, helped blunt the impact of supply declines elsewhere, notably Libya and Iran,” the report said. U.S. production growth in 2013 far surpassed the IEA’s own projections, registering the fastest absolute annual supply expansion of any country in the past two decades, the report said. However, the IEA said the energy industry had absorbed the extra supply through refinery and pipeline expansions and growth in crude rail transport. “The trend in U.S. production looks set to continue in 2014 and beyond, providing once again the largest changes in the market,” the report said. Source: Reuters
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
41
RESTAURANT by Marcy Madrid
BITES
VALENTINE’S DAY - last minute planning tips If you haven’t quite got a plan together for your Valentine’s Day dinner, you still have a few options left. Although both popular dinner date restaurants in Midland, The Garlic Press and Venezia’s Restaurant were almost completely booked by the end of January, they do leave a couple tables open for walk-ins, as long as you’re willing to wait. Another Midland hot spot, Wall Street Bar and Grill, wont take any couples reservations for Valentines day rather only reservations for parties of 6 or more which means more seats will be available for walk-ins. You also have the option to call ahead up to 30 minutes before you plan to go and put your name on their wait list. In Odessa, Red Lobster is a Valentines dinner favorite and they also wont take reservations but will allow you to call ahead up to 30 minutes out. That may help cut down a little on their average V-day wait time of 1-2 hours! The Legendary Barn Door Steakhouse is another obvious and popular choice for a nice dinner and owner Roy Gillean says he and his staff look forward to Valentines Day every year. Since his restaurant is already set up largely with 4 top tables, he said Valentines Day makes it easier for them to be more efficient since there are typically more couples and less parties that show up. The Barn Door will also take reservations only for parties 5 and over on Valentine’s Day but that leaves more seating open to walk-ins, hopefully helping to cut down a little on the wait time. Finally, a surprise contender in the preferred list of Odessa Valentines Day restaurants leads us to a Mexican cuisine favorite, Tequila Tony’s. Restaurant staff says they always try to make it a little more of a special experience for their Valentines Day diners by decorating for the holiday and placing flowers on the tables. Patrons say they also offer chocolate covered strawberries for dessert. Of course, if trying to plan ahead and fight the crowds isn’t you’re idea of a romantic evening, there’s always the option of just staying home and cooking something yourself, saving your restaurant dinner date for February 15th.
I n O dessa:
Red Lobster - No reservations but call ahead seating up to 30 minutes out - average wait time is about 2hrs (432) 367-8926 Tequila Tony’s - First come first served and call ahead seating available (432) 552-0376 Barn Door - Reservations for parties of 5 or more only on Valentines Day. Stop taking reservations at 5pm. (432) 337-4142 42
I n M idland:
Garlic Press - most reservations booked since January. Walk in wait time 2+ hours Venezia’s Restaurant - most reservations booked since January. Walk in wait time 1-2 hours. Call ahead up to 30 minutes (432) 687-0900 Wall Street Bar and Grill - reservations only for parties of 6 or more. Call ahead up to 30 minutes (432) 684-8686
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
43
The Bulldog of Burgundy by Daniel Stephens
Daniel Stephens is the Senior Pastor of Mid-Cities Community Church, since 2006. He is the honored husband to Kayla Stephens, a proud father of twin sons Jonah & Jude, daughter Kampbell, and a precious adopted daughter.
Every year we attend a marriage conference. Before you get too impressed, you should know that we host the conference so we don’t really have the option of not going. Most marriage conferences tend to be manbeating sessions. We try to create an environment that encourages both men and women to grow in the most important human relationship they have, their marriage. This years conference our special guests were Russ and Debbie Austin. They have been married for forty years and taught us what their spouse had done over those forty years to make their marriage great. There were lots of tremendous nuggets, lots of laughs, and probably of few tears. One of the nuggets really struck a chord with me. Russ said this about Debbie, “She sends a lot of honor my way”. Most marriage books say that the biggest need of a woman is to be loved and the biggest need of a man is to be respected. Not coincidently, the Bible tells men in the book of Ephesians to love their wife sacrificially the way Jesus loved his Church and it tells women to honor their husbands. During the conference Russ expounded on how Debbie honored him. She respected his occupation, encouraged him, and was the first to believe in him. Whenever I hear that word “honor” in the context of marriage I think of one of my favorite movies, Cinderella Man. Russell Crowe plays a down and out boxer named James Braddock who struggles to provide for his family during the great depression. Despite being evicted from their New Jersey 44
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
apartment at a poignant part of the story, he eventually mounts an unlikely championship title run. His wife Mae, played by Renee Zellweger, shows up before his big title fight. She has previously tried to talk him out of fighting this bout because his opponent had killed several people in the ring. He had decided, against her request, to take the fight. In my favorite clip, Mae walks into the dressing room, where Jim is surprised to see her. She looks at him and says with reconciliation in her voice, “You can’t win without me behind you”. “That’s what I’ve been telling you” he replies as if he had been bearing a load of bricks on his shoulders. Then, as she holds his face, she breaks out with a speech every man would love to hear. “You just remember who you are. You’re the bulldog of Burgundy, the pride of New Jersey. Your everybody’s hope and you are your kids’ hero. And you are the champion of my heart James J. Braddock!” Butter…. Pure butter to every mans ears.
There have been several moments during Kayla’s and I’s thirteen years of marriage when she delivered a speech like that. When I needed encouragement or someone to believe in me. When the pressures of life were such that, while I knew God existed and cared about me, He used her to remind me of that fact. There are times in life when we need to be reminded of who we are. As men there are moments when we need our wife to grab our face and tell us that we are the champions of their heart and a hero to our kids. Hearing that nugget at the conference made me so grateful to have a wife who sends honor my way. It makes me want to be her bulldog of Burgundy. Follow Daniel on Twitter: @DanielBstephens
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
45
U.S. RIG COUNT - TEXAS States &
through January 30, 2014
BAKER HUGHES RIG COUNT
RIGDATA RIG COUNT
Four Week Average 2012
Four Week Average 2013
Last Week
This Week
Four Week Average 2012
Four Week Average 2013
Last Week
This Week
Waiting to Spud
Texas RRC District 1
140
135
136
132
136
120
118
126
11
Texas RRC District 2
84
82
83
81
86
82
83
79
5
Texas RRC District 3
33
55
57
57
37
56
57
61
4
Texas RRC District 4
30
29
28
29
29
28
30
32
2
Texas RRC District 5
20
7
8
7
18
8
7
8
0
Texas RRC District 6
31
30
31
31
29
31
33
31
1
Texas RRC District 7B
19
13
10
14
19
22
26
22
1
Texas RRC District 7C
70
81
82
77
69
87
80
89
2
Texas RRC District 8
272
276
280
285
250
279
288
282
5
Texas RRC District 8A
38
38
37
39
37
41
43
44
2
Texas RRC District 9
21
21
22
19
36
28
27
26
2
Texas RRC District 10
63
65
66
66
68
69
70
69
0
Texas Total
821
832
839
837
814
851
862
869
35
U.S. Totals
1,760
1,770
1,871
1,956
1,981
1,979
87
Districts
1,777 1,777
COPYRIGHT Š 2013 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 46
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
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 January 31, 2013 Company
Footage Drilled
% of Total
Average Footage
Well Starts
% of Total
Directional Wells
1
Helmerich & Payne, Inc.
54,585,445
17.0%
10,503
5,197
13.0%
4,580
2
Patterson-UTI Drilling Company, LLC
32,188,587
10.0%
10,407
3,093
7.7%
2,646
3
Nabors Industries, Ltd.
29,319,135
9.1%
8,317
3,525
8.8%
3,186
4
Precision Drilling Trust
14,866,562
4.6%
9,493
1,566
3.9%
1,394
5
Ensign Energy Services, Inc.
13,665,867
4.2%
6,666
2,050
5.1%
1,149
6
Nomac Drilling, LLC
12,193,075
3.8%
9,563
1,275
3.2%
1,272
7
Trinidad Drilling, Ltd.
9,116,189
2.8%
10,738
849
2.1%
706
8
Unit Drilling Company
8,920,728
2.8%
9,168
973
2.4%
944
9
Pioneer Energy Services Corp.
8,779,681
2.7%
9,766
899
2.2%
666
10
Cactus Drilling Company, LLC
7,043,952
2.2%
10,466
673
1.7%
626
11
Capstar Drilling, LP
6,515,796
2.0%
6,458
1,009
2.5%
205
12
Savanna Energy Services Corp.
5,456,874
1.7%
9,692
563
1.4%
195
13
Sidewinder Drilling, Inc.
4,698,784
1.5%
8,622
545
1.4%
418
14
Xtreme Drilling and Coil Services Corp.
4,645,995
1.4%
10,122
459
1.1%
444
15
Desoto Drilling, Inc.
4,280,873
1.3%
4,464
959
2.4%
955
16
Cyclone Drilling, Inc.
4,034,672
1.3%
7,685
525
1.3%
504
17
Complete Production Services, Inc.
3,433,882
1.1%
9,982
344
0.9%
123
18
CanElson Drilling, Inc.
3,322,947
1.0%
10,224
325
0.8%
57
19
Sendero Drilling Company, LLC
3,290,046
1.0%
11,544
285
0.7%
0
20
Robinson Drilling of Texas, Ltd.
2,657,375
0.8%
11,072
240
0.6%
2
21
Lariat Services, Inc.
2,637,268
0.8%
6,512
405
1.0%
196
22
Latshaw Drilling & Exploration Company
2,576,436
0.8%
7,760
332
0.8%
327
23
Orion Drilling Company, LLC
2,575,246
0.8%
11,497
224
0.6%
212
24
Scandrill, Inc.
2,484,633
0.8%
12,120
205
0.5%
171
25
SST Energy Corporation
2,183,489
0.7%
9,291
235
0.6%
198
26
Big Dog Drilling Company
1,816,017
0.6%
11,792
154
0.4%
12
27
Basic Energy Services, Inc.
1,776,020
0.6%
6,727
264
0.7%
64
28
Lewis Petro Properties, Inc.
1,708,700
0.5%
11,241
152
0.4%
150
29
Silver Oak Drilling, LLC
1,667,695
0.5%
8,175
204
0.5%
101
30
Frontier Drilling, LLC
1,609,466
0.5%
9,093
177
0.4%
161
31
ProPetro Services Incorporated
1,539,650
0.5%
11,576
133
0.3%
0
32
Bison Drilling and Field Services, LLC
1,507,616
0.5%
10,617
142
0.4%
10
33
Murfin Drilling Company, Inc.
1,449,360
0.5%
4,752
305
0.8%
0
34
Cade Drilling, LLC
1,428,794
0.4%
10,354
138
0.3%
132
35
Aztec Well Servicing Co.
1,413,112
0.4%
6,253
226
0.6%
103
Total Top 100 for year 2013
321,762,772
100.0%
---
40,088
100.0%
---
RANK
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
47
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 January 31, 2013
RANK
Company
Footage Drilled
% of Total
Average Footage
Well Starts
% of Total
Directional Wells
1
Anadarko Petroleum Corporation
17,530,421
5.4%
10,081
1,739
4.3%
1,669
2
Chesapeake Energy Corporation
12,336,336
3.8%
10,341
1,193
3.0%
1,193
3
EOG Resources, Inc.
10,774,917
3.3%
10,584
1,018
2.5%
963
4
Apache Corporation
10,184,797
3.2%
8,750
1,164
2.9%
550
5
Pioneer Natural Resources Company
9,636,923
3.0%
13,094
736
1.8%
426
6
Devon Energy Corporation
9,604,423
3.0%
9,173
1,047
2.6%
969
7
Occidental Petroleum Corporation
9,134,221
2.8%
6,021
1,517
3.8%
710
8
BHP Billiton Limited
8,209,446
2.6%
13,327
616
1.5%
607
9
Marathon Oil Corporation
6,595,569
2.0%
15,268
432
1.1%
432
10
Exxon Mobil Corporation
6,260,999
1.9%
7,340
853
2.1%
551
11
Encana Corporation
6,072,388
1.9%
10,805
562
1.4%
540
12
ConocoPhillips Company
5,720,761
1.8%
9,197
622
1.6%
500
13
Chevron Corporation
5,636,520
1.8%
4,575
1,232
3.1%
462
14
Southwestern Energy Company
5,177,319
1.6%
4,724
1,096
2.7%
1,091
15
Continental Resources, Inc.
4,899,876
1.5%
7,527
651
1.6%
649
16
Concho Resources, Inc.
4,852,251
1.5%
10,618
457
1.1%
212
17
QEP Resources, Inc.
4,649,659
1.4%
11,177
416
1.0%
399
18
Whiting Petroleum Corporation
4,197,349
1.3%
9,694
433
1.1%
353
19
Noble Energy, Inc.
4,066,652
1.3%
9,524
427
1.1%
421
20
SandRidge Energy, Inc.
3,368,642
1.0%
5,280
638
1.6%
469
21
Royal Dutch Shell, plc
3,335,257
1.0%
12,828
260
0.6%
257
22
Newfield Exploration Company
3,212,054
1.0%
7,234
444
1.1%
421
23
Oasis Petroleum North America, LLC
2,929,086
0.9%
10,031
292
0.7%
291
24
EP Energy E&P Company, LP
2,822,620
0.9%
10,416
271
0.7%
240
25
Hess Corporation
2,803,920
0.9%
6,692
419
1.0%
419
26
Murphy Oil Corporation
2,774,968
0.9%
10,278
270
0.7%
268
27
CrownQuest Operating, LLC
2,758,900
0.9%
12,048
229
0.6%
0
28
Linn Energy, LLC
2,596,210
0.8%
8,891
292
0.7%
115
29
Energen Resources Corporation
2,533,100
0.8%
9,313
272
0.7%
57
30
WPX Energy, Inc.
2,334,320
0.7%
7,411
315
0.8%
311
31
SM Energy Company
2,229,372
0.7%
9,693
230
0.6%
223
32
Parsley Energy Operations, LLC
2,193,550
0.7%
12,679
173
0.4%
1
33
Statoil, ASA
2,026,478
0.6%
9,382
216
0.5%
216
34
BP, plc
1,965,598
0.6%
10,237
192
0.5%
186
35
Rosetta Resources, Inc.
1,933,160
0.6%
10,069
192
0.5%
141
Total Top 100 for year 2013
321,762,772
100.0%
---
40,088
100.0%
---
48
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
Source: www.eia.gov
Midwest propane markets tighten further on cold weather The Upper Midwest is facing a tight market for propane this winter, as evidenced by a 1.5-million-barrel inventory draw in the region for the week ending last Friday, January 10. At the beginning of November, the corn harvest in the Upper Midwest (Minnesota, Iowa, Wisconsin, Nebraska) pulled large quantities of propane from distribution terminals for corn drying. Between late-November and December, supply disruptions prevented these terminals from replenishing their supplies of propane. With the onset of severely cold weather this past week, propane supplies are extremely tight, forcing emergency measures to ensure supply and increasing the Midwest spot price of propane at Conway, Kansas compared with the spot price on the Gulf Coast at Mont Belvieu, Texas. Propane prices in the Midwest will likely need to rise to keep propane in the region rather than flowing south to the Gulf Coast. In October, EIA noted the effects of increased production of domestic oil and gas on propane flows between the Midwest and the Gulf Coast. Infrastructure changes have allowed the growing supplies of propane and other hydrocarbon gas liquids (HGL) from increased production to flow south from and through the Midwest to supply Gulf Coast petrochemical demand and also to gain access to the global market. Recently, the onset of severely cold weather in the Midwest has increased regional demand for propane and other heating fuels.
A late-2013 corn harvest, along with cold wet weather, resulted in strong demand for propane at distribution terminals in the Upper Midwest. For the week ending November 1, Midwest propane inventories dropped more than 2 million barrels, the largest single-week stock draw in November since 1993. This demand prompted a strong price response, and propane at Conway moved to a 3-cent-per-gallon (/gal) premium over Mont Belvieu during the first week of November, the first such premium in almost three years. After the harvest, logistical problems prevented the region from fully replenishing inventories before the onset of winter. The Upper Midwest is supplied with propane by pipelines (Mid-American and ONEOK) flowing north from Conway (home to 30% of the nation’s propane storage), the Cochin pipeline coming south from Canada, and from rail deliveries (Figure 1). The Cochin pipeline, which delivers HGL from Canada to the Upper Midwest, was out of service for maintenance from late November to December 20 and unavailable to deliver supplies. Rail transportation disruptions, both due to weather and other factors, prevented deliveries from Mont Belvieu and Conway, as well as from Canada.
Even before the recent cold snap, Midwest propane markets were relatively tight compared with those on the Gulf Coast for other weather-related reasons. In addition to space heating needs, the Midwest uses propane for agricultural applications such as corn drying. For corn to be stored, it first needs to be dried, using large-scale heaters that often use propane for fuel. FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
49
Since early 2010, propane prices at Mont Belvieu, the nation’s largest propane storage and market hub, were higher than at Conway by as much as 30 cents/ gal, prompting propane supplies to flow south on newly expanded southbound pipelines. A large local petrochemical demand and access to the global propane market via expanded HGL export capacity supported Mont Belvieu prices and encouraged propane from the Rockies (PADD 4) and elsewhere in the Midwest to flow south.
The Midwest will also need to prepare for the coming reversal of Kinder Morgan’s Cochin Pipeline, which delivers HGL from Canada to the upper Midwest. Kinder Morgan plans to reverse the flow to deliver light condensate to Canada. This reversal will change supply dynamics in the Midwest. However, this situation may also improve the economic prospects for infrastructure projects to process and transport HGL from the Bakken formation in North Dakota and Montana to Midwest markets farther east.
Low temperatures and winter storms closely followed the corn harvest, and logistical problems continued. The colder weather increased residential space heating demand at a time when markets were already tight. As demand outpaced supply, inventories dropped further, by 1.5 million barrels and 1.2 million barrels for the weeks ending December 6 and January 3, respectively. By January 3 (Figure 2), prices had vaulted to a 21-cent/gal premium to Mont Belvieu.
Gasoline price flat again while diesel fuel falls
Strong back-to-back demand surges, low inventories, and supply challenges forced emergency measures to ensure residential adequacy of propane. Several Midwestern states responded by suspending limitations on hours of service for propane delivery truck drivers. Trade press reported long waiting lines at propane distribution terminals in the Upper Midwest, as well as supply of propane by truck from as far away as Oklahoma. Since the week ending October 11, Midwest propane inventory levels have dropped by 12.8 million barrels, compared with a drop of 7.3 million barrels for the same period’s five-year average. Because global prices for propane are significantly higher than U.S. prices, propane supplies will continue to move to Mont Belvieu for export. Midwest propane prices will rise to keep marginal supplies in the region when they are needed.
The U.S. average retail price of regular gasoline decreased less than one cent to remain at $3.33 per gallon for the third consecutive week as of January 13, 2014, two cents higher than last year at this time. Prices increased three cents in the Midwest and Rocky Mountains, to $3.25 per gallon and $3.15 per gallon, respectively, while decreasing in all other regions of the nation. The East Coast price fell three cents to $3.41 per gallon, and prices on the Gulf and West Coasts both were down two cents, to $3.11 per gallon and $3.53 per gallon, respectively. The national average diesel fuel price fell two cents to $3.89 per gallon, a penny lower than last year at this time. Prices decreased in all regions of the nation, with the largest decrease coming on the West Coast, where the price fell four cents to $4.00 per gallon. The Midwest price was down three cents to $3.85 per gallon, and both Gulf Coast and Rocky Mountain prices lost two cents, to $3.78 per gallon and $3.89 per gallon, respectively. The East Coast price was $3.94 per gallon, a penny lower than last week.
Residential propane price increases slightly, heating oil price decreases
Residential heating oil prices decreased nearly 2 cents per gallon to reach a price of $4.00 per gallon during the period ending January 13, 2014. This is less than 1 cent per gallon lower than last year’s price at this time. Wholesale heating oil prices increased 2 cents per gallon last week to $3.09 per gallon. The average residential propane price increased by over 1 cent per gallon last week to $2.84 per gallon, almost 58 cents per gallon higher than the same period last year. Wholesale propane prices rose 2 cents per gallon to just under $1.71 per gallon as of January 13, 2014. 50
PERMIAN BASIN ENERGY MAGAZINE | www.PBEMag.com | FEBRUARY 2014
1993 2013
-Li
n e P l a s ti c s LC
In
YEARS
1993 2013 st dfa Stea
uf ac tur ing
YEARS
De n dic Ma atio n to Quality
FEBRUARY 2014 | www.PBEMag.com | PERMIAN BASIN ENERGY MAGAZINE
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